Uber, the multi-billion dollar ride-hailing company has finally won a deal to buy Postmates for $2.65 billion to bolster its food delivery business. The deal, which is an all-stock deal, is highly commendable and has the services of the startup, Postmates complementary to Uber Eats (meal delivery arm of Uber). Recall, that a month ago Uber tried and failed to seal the acquisition deal of Grubhub. Uber and Postmates who have been in discussion for about 4 years, intensified the acquisition talk about a week ago, after an approach by Uber. However, Tquoted GrubHub Inc was bought over by Europe’s Just Eat Takeaway.com NV for $7.3 billion.
“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 statement on Monday.
The multinational ride-hailing service company, agreed on the acquisition of the food delivery app, Postmates Inc, in a bid to expand its food delivery business.
According to Bloomberg, the deal which has been approved by the board of directors of Uber will have the head of Uber’s food delivery business, Pierre-Dimitri Gore-Coty, to continue to run the combined delivery business. Postmates Chief Executive Officer, Bastian Lehmann, and his team will continue to manage Postmates as a separate service based on the agreement.
About The Deal
However, the deal, which is subject to regulatory approvals, is expected to close in the first quarter of 2021. Uber said it is committed to providing bridge financing to Postmates as it waits for approvals.
Shares of Uber were up 5% in early trading Monday following the news. Postmates is a pioneer in the on-demand delivery industry, but it is one of the smaller competitors in the US market. In May, the startup earned 8% of meal delivery sales in the US, according to analytics firm Second Measure. DoorDash, which acquired premium restaurant delivery service Caviar last August, is the US leader in terms of sales, with a 44% share.
Postmates however, have been able to extend its operations to the nooks and crannies of thousands of cities across the US. They also have a strong presence in big markets like San Diego, Phoenix, Los Angeles, and Las Vegas. In a nutshell, the brand has 10 million active customers and has sealed up partnerships with a number of trendy brands like Sugarfish.
The CEO, Khosrowshahi said that Postmates has been able to use technology to group together orders efficiently in its popular markets.
Khosrowshahi said on a conference call on Monday when discussing the deal, “We’ve always admired Postmates, I guess, begrudgingly from afar in that it was a competitor who was able to compete aggressively and to be a leader in some very important markets with a much smaller capital base than a lot of its competition, including ourselves”.
What To Know About Uber’s Expansion
Uber, started as a ride-hailing service but has long dabbled into other categories, including meal deliveries with its Uber Eats service. Efforts have taken on new urgency as the pandemic has simultaneously cut demand for its core rides business while leading to skyrocketing demand for meal deliveries.
Uber Eats has been viewed as a bright spot for the company, especially as people increasingly stay at home. “At a time when our Rides business is down significantly due to shelter-in-place, our Eats business is surging,” Khosrowshahi said on the company’s first-quarter earnings call in early May.