Uber Technologies Inc said on Monday it would buy Postmates Inc in a $2.65 billion deal, looking to expand its reach into the food-delivery market as the coronavirus crisis upends its core ride-hailing business.
The move is just weeks after Uber walked away from a deal to buy U.S. online food delivery company GrubHub , which would have given Uber’s money-losing restaurant delivery service a leg up on market leader DoorDash. European food-ordering firm Takeaway.com NV scooped in to buy GrubHub in a $7.3 billion deal.
Food delivery businesses have seen orders surge as millions of Americans were marooned at home by the coronavirus crisis. Traditionally capital intensive businesses, however, they have also kept commissions low to fend off increased competition in the space.
Uber, which has been under pressure as ride-hailing services across the globe plummets because of lockdowns, offered a premium of about 10% on Postmates’ last valuation of $2.4 billion. Uber’s shares were up 4.5% in early trading.
“As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100% year on year,” Uber Chief Executive Officer Dara Khosrowshahi said.
After close, the deal is expected to generate about $200 million synergies in two years, Khosrowshahi said on a conference call, adding that the transaction should be profitable for Uber.
Uber currently estimates that it will issue about 84 million shares of common stock for 100% of the fully diluted equity of Postmates, the company said in a statement. The boards of both companies have approved the transaction, and stockholders representing a majority of Postmates’ outstanding shares have committed to support the transaction, Uber added.
Postmates operates in 4,200 U.S. cities and delivers a host of products like sushi, coffee or a pair of jeans from restaurants and stores to customers’ doorstep. One of the many taglines reads – “Have chips but no guac? Postmate it.”
Founded in 2011, San Francisco-based Postmates accounted for 8% of the U.S. meal delivery market in May, with rival DoorDash leading with a 44% market share, according to analytics firm Second Measure. Postmates raised $225 million last year, while Doordash raised $400 million from private investors at a valuation of $16 billion in June.