Blue Apron’s acquisition by Wonder Group offers investors an out after 6 tumultuous years
Wonder Group will pay Blue Apron shareholders $13 per share through a tender offer that values the company at $103 million – a premium of 137% of Blue Apron’s closing price of $5.49 yesterday and a 77% premium over the 30-day volume weighted average of the company’s Class A common stock, but a staggering 5,050% drop from when Blue Apron when public in June 2017 for $2bn.
Enticed by the premium and the potential of the merged businesses, shares of Blue Apron surged 133% in premarket trading today.
Under the merger, which was unanimously approved by Blue Apron’s board of directors, Wonder will continue Blue Apron’s current operations but with anticipated benefit of “new synergies between consumer facing apps and delivery logistics,” Blue Apron explained in a release.
“The Blue Apron brand and products that our customers know and love will stay the same, with more opportunity for product expansion in the future,” said Blue Apron President and CEO Linda Lindley.
Wonder Group is creating a ‘mealtime super app’
Wonder Group CEO and Founder Marc Lore added in the release that “Wonder is creating the mealtime super app, serving a broad range of occasions that feature cuisines from some of the world’s best chefs and restaurants while leveraging our culinary engineering and vertically-integrated model. … At-home meals play a key role in this vision and have been on our strategic roadmap since the beginning.”
Wonder proposed the merger after Blue Apron sold its operational infrastructure to FreshRealm, as part of an effort to become an “asset light” business that when combined with previous layoffs significantly reduced the company’s overhead and put it on a path to return to profitability.
Wonder’s offer was considered alongside several others, according to Blue Apron.
FreshRealm has agreed to exercise its warrant as part of the transaction and then tender its shares.
What was behind Blue Apron’s decline?
When Blue Apron launched in 2012 it was one of the first players in what would become a booming – and crowded – meal kit delivery industry. But despite its first-mover advantage, and significant promise based on its ability to attract new customers, the company struggled to keep customers as it engaged in a promotional war with competitors in which all players offered steep discounts, free meals and other perks that shoppers quickly learned how to play against each other.
After sales and consumer loyalty plummeted, Blue Apron in 2019 tried to claw its way back to profitability by focusing on ‘high affinity’ customers that spend more and stick around. But while customer metrics improved slightly over the remainder of 2019, much of the damage had been done as many consumers were happy to bounce between services as they sought the best deal.
Rumors that Blue Apron was looking for a buyer began in early 2020 – just before the pandemic hit – and were greeted with skepticism with industry insiders suggesting it would “be lucky to find a buyer” given it lost more than twice as much money in 2019 as the company’s entire market capitalization.
A boost from the pandemic and Blue Apron’s deal with FreshRealm helped change that dynamic – giving both it and Wonder Group a rosier outlook.
“We couldn’t be more excited to welcome Blue Apron to the Wonder platform and look forward to working with [CEO] Linda [Findley] and her exception team,” Lore said in a statement.
While the deal brings “synergies,” supply chain and inflation are still formidable challenges, as is competition from rivals ranging from retailers to other delivery services.
