- Uber will buy food delivery firm Postmates for $2.65 billion in an all-stock deal, Uber said Monday, confirming earlier reports.
- Postmates was founded by Bastian Lehmann, Sam Street, and Sean Plaice in 2011. It currently only serves the US, and is headquartered in San Francisco.
- Uber has been circling around several smaller food-delivery businesses over the past few years, attempting to buy GrubHub and the UK's Deliveroo.
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Uber will buy the food delivery startup Postmates in an all-stock deal worth $2.65 billion, the companies announced Monday, as the ride-delivery firm hopes to bolster a business cratered by the coronavirus.
Food-delivery has come front and center for Uber since March, when a near complete dropoff in global travel decimated its core taxi business. A combined Uber Eats and Postmates will help Uber chase the current market-leader DoorDash, bringing it to about a 35% market share, according to estimates from Second Measure. DoorDash currently holds about 45%, the firm estimates.
Shares of Uber surged as much as 9% in early trading Monday following the announcement.
"Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery—they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19," Uber CEO Dara Khosrowshahi said in a press release.
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"As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100 percent year on year. We're thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country," Khosrowshahi continued.
Uber has been circling around smaller food delivery companies in many markets over the past few years. Most recently, it tried and failed to acquire GrubHub, which was acquired by Europe's Just Eat in June. Uber also held talks with the UK's Deliveroo in 2018, but the two firms couldn't agree on a price. In 2019, it struck a deal with Chilean grocery delivery firm Cornershop, which should close soon.
CEO Dara Khosrowshahi has previously said that Uber will double down in areas where the ride-hailing giant can realistically expect to either win the market or be the second-biggest player. This means exiting some markets where the firm has failed to become the number-one or number-two player, like when Uber Eats sold its Indian business to local player Zomato in January. It also sold its wider southeast Asian business, including its food delivery arm, to rival Grab in 2018.
"This is an aggressive move by Uber to take out a competitor on the Uber Eats front and further consolidate its market position, especially as the COVID-19 pandemic continues to shift more of a focus to deliveries vs. ride-sharing in the near-term," Dan Ives, an analyst at Wedbush Securities, said in a note to clients about the deal, which is expected to close in the first quarter of 2021, pending approval from US regulatory agencies and Postmates shareholders.
On a conference call Monday, Uber said its eats business is now profitable on an EBITDA basis, an adjusted financial metric, in many markets. The combined businesses will be able to significantly cut costs, Khosrowshahi said, helping Uber reach overall profitability — something it's worked towards for years, but never achieved. Postmates will remain a separate consumer app, and Uber declined to share any details on the company's finances.
Uber specifically cited a strong userbase of young people and millennials on Postmates that it will gain as part of the deal.
"Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand," Postmates co-founder and CEO Bastian Lehmann said in the press release.
"Joining forces with Uber will continue that mission as we continue to build Postmates while creating an even stronger platform that brings this mission to life for our customers. Uber and Postmates have been strong allies working together to advocate and create the best practices across our industry, especially for our couriers."
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See Also:
- Uber paid cash to some laid-off employees for their unvested stock, but some of them are unhappy about the price it paid
- Uber is reportedly in talks to buy food delivery firm Postmates for $2.6 billion
- Postmates has quietly revived its plans to go public amid a surge of food delivery deals during the pandemic
