In a confirmation made today, Uber announced that it had finally acquired a food delivery company, that of Postmates, to the tune of a $2.65 billion all-stock deal. With this acquirement Uber and its branch of food delivery, Uber Eats, will begin to gain some significant ground against its current competitor of DoorDash.
DoorDash is currently reported to control an estimated 37% of the food delivery market in the US. Before the Postmates deal finalized, Uber Eats held an estimated 20% share. According to industry data, Grubhub comes in at an estimated 30%.
Just last month, Uber failed in its bid for Grubhub, which, if the delivery company had been able to have obtained, would have solidly positioned them as the dominant food delivery service in the US today.
However, Uber did lose out to an Amsterdam-based company, Just Eat Takeawy.com, which snatched up the Chicago based Grubhub for a cool $7.3 billion. It was reported had the deal went through, Uber was planning to team up Grubhub with the Uber Eats division of its business.
There is no denying that the food delivery sector is going through significant consolidation and changes this year, and more can only be expected. Since the coronavirus pandemic griped and crippled the country earlier this year, more and more people are turning to food delivery services.
However, they are not necessarily loyal to one company, as they will shop around and look for the best deal. The rideshare division of Uber’s business showed a drop in revenue of 3% in the first quarter, compared to its previous year’s earnings. On the other hand, during the same reported period, bookings through the food delivery wing surged a massive 54%.
With its recent acquisition of Postmates, the benefits for Uber are two-fold. They will not only see a larger share of the food delivery market, which they have been longing to obtain for some time, but they also have a fall back plan against any further losses in their ride-sharing division do to the ongoing pandemic.
Analysts feel that Uber has pretty much been pushed back against the wall with the consolidation attempts. With the failure of the Grubhub acquisition, the Postmates deal was the most strategic next option.
Board members of both companies have reportedly approved the purchase, and the finalizing of the deal is anticipated to occur sometime in the first quarter of 2021.
Will we be seeing more and more companies merging in response to the pandemic?