(Dealbook) Just Eat, the British online food-ordering giant that has been expanding globally, has decided to join the competition in Brazil rather than continue fighting it.
The company has agreed to merge its Brazil operations with iFood, owned by the mobile company Movile in São Paulo, both companies said in a statement on Friday.
The joint venture will be called IF-JE Participações and will operate under the iFood brand. Just Eat said that it would transfer 100 percent of the shares of Just Eat Brazil Servicos Online, which trades as RestauranteWeb, to iFood.
After the transaction, Movile will own 50.02 percent of the joint venture. Just Eat will have a 25 percent stake and iFood’s original founders will take the remaining 24.98 percent.
Just Eat will also provide $5.7 million to help finance the joint venture.
Acknowledging the competitive environment in Brazil, Just Eat’s chief executive, David Buttress, said in the statement, “The iFood founders and Movile have built a great business.”
“By combining it with RestauranteWeb, we are creating the leader in this exciting market,” he added.
The new company is expected to generate more than a million orders a month next year and $400 million for partner restaurants in 60 cities.
Just Eat acquired RestauranteWeb in 2011, hoping to gain a foothold in Latin America’s largest economy. But winning the market proved to be a challenge. The executive it brought in to serve as country manager, Emerson Calegaretti, left by the end of the 2012 and subsequently joined a rival, HelloFood, owned by Rocket Internet. In a sign of the intensity of the competition, HelloFood said on Friday that it had acquired another rival, Entrega Delivery.
In 2013, RestauranteWeb posted a pretax loss of 2.6 million pounds, the statement said. The value of its gross assets as of June 30 was £1.3 million.
Outside of Brazil, though, Just Eat has been growing rapidly. In April, it raised £360.1 million in a much-trumpeted initial public offering on the London Stock Exchange.
For the first half of this year, it reported a net profit of £6 million, compared with £2 million in the period a year earlier, largely on the strength of its business in Britain. Revenue grew 69 percent, to £51.9 million, with the British business making up 74 percent of that total.
Its earnings before interest, taxes, depreciation and amortization in Britain was £20.3 million, but Ebitda for what it lumps together as other regions excluding Denmark was a loss of £4.9 million.
There have been other past indications of the challenge in Brazil. In Just Eat’s initial public offering prospectus this year, it noted that growth in Ebitda in Britain and Denmark was offset by losses elsewhere, “predominantly in Brazil, Canada, and Spain.”
For Movile, whose majority shareholder is the South African conglomerate Naspers, the move is part of its larger effort to become a leading mobile commerce platform in Latin America. “We know that food delivery is just the beginning,” Movile’s founder and chief executive, Fabricio Bloisi, said in an interview.
Earlier this year, Movile raised $35 million in a round led by the Brazilian fund Innova Capital, which counts the billionaire Jorge Paulo Lemann as an investor, according to two people close to the firm.
Mr. Bloisi added, “We will keep investing in local commerce, online to offline services and same-day delivery to enable this mobile future.”