Uber acquires meal delivery service Postmates for $2.65 billion

Uber will acquire food delivery service Postmates in a $2.65 billion all-stock deal designed to give the ride-hail company a much-need jolt after its offer to buy Grubhub fell apart amid antitrust scrutiny.

Postmates’ app will continue steadily to run separately after the acquisition, but it’ll be able to make use of a merchant and delivery network along with Uber Eats. Uber says this will mean more restaurant options for consumers and much more efficient deliveries for drivers who grab multiple orders at a time. The companies intend for the offer to close in Q1 2021.

Uber desperately needs its meal delivery division, Uber Eats, to create up for the huge losses it’s been experiencing since the start of coronavirus pandemic. Food delivery is not profitable, nor is Uber’s core ride-hailing business. But the business is hoping that with restaurants closed to in-person dining, more folks will be ordering takeout in the foreseeable future.

The virus has had its toll on Uber, with riding-hailing down about 80 per cent. And with the number of cases spiking in several parts of the usa, the company’s losses could continue to mount. Meanwhile, bookings in its Uber Eats division were up significantly more than 54 per cent year over year, because of increased demand for food deliveries, the business reported in May.

Uber Eats is an obvious bright spot, but it’s still under immense strain, thanks to regulatory pressure and competition from Grubhub and DoorDash. Uber Eats has sen an acceleration popular since mid-March, with 89 percent year-over-year gross bookings growth in April excluding India. And the company can be abandoning its unprofitable markets at a reliable clip. Uber recently shuttered its Eats business in eight cities.

But despite these gains, Uber is still trailing behind DoorDash, the leader in food delivery. In June, DoorDash captured 45 per cent of transactions, according to researching the market firm Edison Trends. By purchasing Postmates, Uber can improve its marketshare to 37 per cent, from its current position of 29 percent.

Uber experimented with buy Grubhub earlier this season, but the deal fell apart amid reported antitrust scrutiny, and Grubhub ended up planning to European service Just Eat Takeaway for $7.3 billion.

Postmates, which can be headquartered in San Francisco, helped revolutionize the food delivery segment when it launched in 2011. The company had been likely to go public in October but reportedly told its advisers market conditions were suboptimal and delayed the filing. Fox Business reported recently that the plan is back in motion, with the meals delivery service planning to file paperwork for an initial public offering within days.