Barely six months after a merger with its biggest competitor, Seamless, the New York-based online food delivery service, is charting its course to public markets.
Management of GrubHub Seamless, as the combined company is known, has had discussions about how, and when, it will go public, something that could happen in the latter part of 2014 or early 2015, according to several people familiar with the situation.
In 2012, Seamless independently generated about $85 million in revenue, which was an increase of about 60%. One source familiar with the financials pegged the combined entity's 2013 revenue at more than $200 million, with 40% annual growth. At a 20-times revenue multiple, the company's post-IPO market cap could be between $3 billion and $5 billion.
In an e-mail statement, a Seamless press officer said the company would not comment on speculation. "We are focused on company integration and have many options as we move forward as a combined organization," the official wrote.
Seamless -- for the uninitiated -- has become a virtual go-to for young urban professionals, who often use the term in place of the long-time descriptor covering the process of ordering food to be delivered at one's place of residence -- takeout. Now, it is common to hear customers say they're 'ordering Seamless,' regardless of the nationality or origin of the victuals at issue.
But it's not the individual consumer that serves as Seamless' primary revenue driver. The company has become a de facto caterer for law firms and financial services institutions, which order massive spreads to cover a floor's lunchtime needs.
One source suggested the enterprise user base for Seamless will hold steady, even if other competitors -- like Yelp Inc., which, in September, launched its own food delivery product with the help of Eat24 and Delivery.com -- seek to invade its space. According to Seamless' website, the company provides services to 4,000 businesses in 40 cities across the U.S. and U.K.
In late 2012, GrubHub Inc., then an independent company, reportedly hired Citigroup Inc. for help with an initial public offering to be launched in 2013. By May of this year, however, Seamless and GrubHub had merged. Terms of the transaction were not publicized, but it was widely understood at the time that Seamless was the larger of the two entities.
When the deal closed, the combined company reported it was processing 130,000 orders daily in conjunction with 25,000 restaurants in 500 cities in the U.S. and U.K., along with the orders it processes for business clients.
And while Seamless' cash grab on the heels of Twitter Inc.'s successful offering could seem like executives visualizing a peak market at which tech companies are able to boost the size and price of their deals en route to the Nasdaq or New York Stock Exchange, the company's trajectory has been building to an IPO for some time.
For technology companies, the IPO market is white-hot: Twitter's debut Thursday seemed to quash investor doubts about app-centric technology 18 months after Facebook's launch disappointed investors. The night Twitter's shares priced, Nov. 6, The Wall Street Journal reported that Square, another startup that processes mobile and electronic payments, is gearing up for a 2014 IPO.
In a statement at the time of their merger, Seamless and GrubHub revealed their joint entity was booking revenue "well in excess of $100 million."
Sources said that for Seamless, the company is not champing at the bit -- one said the company "feels it has a long ramp to work with" before its debut -- and could go public in the second half of 2014, even in 2015. Those who watched the Seamless-GrubHub deal closely noted that Matt Maloney, CEO of the latter -- which had already begun charting its course toward public markets -- wound up leading the company that bore the identity of the former. Jonathan Zabusky, CEO of Seamless before the deal, stayed on as president.
The combined companies have a large investor base. Origin Ventures, Leo Capital Holdings, Amicus Capital, Benchmark, DAG Ventures, Lightspeed Venture Partners, Greenspring Associates, Mesirow Financial and T. Rowe Price all backed GrubHub. Seamless investors include SeventySix Capital, Spectrum Equity and Stripes Group. Spectrum is said to be the largest shareholder, but with a minority position. Spectrum first became a backer of Seamless in 2011 after buying a stake from Aramark Corp.
Because Aramark backed Seamless, it handed off shares in the startup to its private equity investors after the spinout.
The Deal Pipeline reported earlier this year that Aramark is separately prepping an IPO of its own, its third. Thus, Warburg Pincus LLC, Thomas H. Lee Partners, CCMP Capital Advisors LLC and GS Capital Partners are also shareholders in the new entity, as well as the respective managements of each startup.
This accounting doesn't include any of the stockholders in startups the two companies bought -- sources could not provide specifics as to which deals were stock and which were cash. That group includes GrubHub bolt-ons Dotmenu and FanGo, as well as investors in Osimo and Menupages, which were bought by Seamless.
With bigger players like Seamless and Yelp dominating the space, one prominent Silicon Valley investor said he won't be eager to take on the titans any time soon: "There are a gazillion entrepreneurs going after this," he said. "We mostly stay out of this space." n
NOTE: An earlier version of this story misstated the combined company's name.
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