Following $16 Billion WhatsApp Deal, Is GrubHub Seamless Next?

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With Facebook Inc (NASDAQ:FB) paying a record $16 billion to acquire WhatsApp, a deal announced yesterday, the market environment may be right for additional tech IPOs, or at least that’s what GrubHub Seamless Inc., may be hoping.

The internet-based menu and takeout ordering service, formed last year in merger, may be preparing for an initial public offering, the Wall Street Journal is reporting.  Company officials have met with investment banks to facilitate an IPO, potentially occurring in the first half of 2014, the report says.

Pre-IPO activity noted

Chicago-based GrubHub has engaged in a flurry of pre-IPO activity lately.  Last year GrubHub and New York-based Seamless merged, which was followed by T. Rowe Price Group Inc (NASDAQ:TROW) taking a stake in the combined firm.  In late January GrubHub and Foresquare announced they were launching a joint project.  As reported in ValueWalk, under the agreement, users can search for a restaurant through the Foursquare application and the GPS application inside the mobile phone will serve up participating restaurants.

Consolidation leads to IPO

There had been a significant amount of industry consolidation leading up to the IPO.  In 2011 Seamless, which has a list of who’s who investors including Aramark’s private equity group, Warburg Pincus LLC, Thomas H. Lee Partners LP, CCMP Capital Advisors LLC and Goldman Sachs Group Inc (NYSE:GS), acquired Dotmenu. For its part, Grubhub acquired and leading up to the merger with Seamless. Combined, GrubHub Seamless covers 600 cities and boasts 28,000 restaurants as active participants in the service.

The GrubHub Seamless service is free to users.  They generate revenue by taking a small fee off each order, paid by the restaurant. In 2012 they generated over $100 million in revenue, according to the report.

Dangerous to hazard a guess at GrubHub valuation

In light of the somewhat rich WhatsApp buyout price, it is unclear where the GrubHub Seamless offering might be priced. However, when T. Rowe Price Group Inc (NASDAQ:TROW)’s New Horizons Fund valued its 1.4 million shares, it placed a $12 million valuation in the fund’s prospectus.  Odds are the IPO valuation will be quite a bit north of that level.

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