Ridesharing giant Uber is reportedly set to purchase the fourth-largest food delivery service, Postmates, for $2.65 billion in stock. Postmates is a direct competitor for Uber Eats, the Silicon Valley company’s food delivery subsidiary.
CNBC reports that ridesharing giant Uber has purchased the food-delivery service Postmates for $2.65 billion in stock. This deal will unite Postmates, the fourth-largest food delivery service in the United States, with Uber Eats, Uber’s own food delivery service. The companies stated that Uber intends to keep the Postmates app running separately “supported by a more efficient, combined merchant and delivery network.”
Uber previously attempted to purchase rival food delivery service GrubHub but negotiations broke down as the companies could not agree on a break-up fee and Uber grew frustrated with what it perceived as stalling tactics. GrubHub was instead purchased by the European food delivery service JustEatTakeaway in early June.
Uber is reportedly hoping that food delivery will help to boost its business during the Wuhan coronavirus pandemic as the demand for rides has plunged. Uber stated in its first-quarter earnings call that gross booking revenues for its rides segment was down by 80 percent in April from one year earlier while gross bookings revenue in Uber Eats had increased by more than 50 percent during the period.
Postmates is particularly popular in urban areas such as Los Angeles and Miami but struggled to compete nationally against DoorDash, GrubHub, and Uber Eats. Even following the purchase of Postmates, Uber Eats will still trail behind DoorDash in the food delivery market share, according to Edison Trends.
Postmates reportedly filed confidentially for an IPO in February 2019 but delays its IPO later that year as market conditions deteriorated and competition arose. Postmates had reportedly been considering restarting the IPO process as well as an offer from a special purpose acquisition company (SPAC) which is a shell company that exists solely to take another company public. Postmates was valued at around $2.4 billion in its last fundraising round in September.
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