Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Uber approaches Grubhub with acquisition offer: sources

Stock MarketsMay 12, 2020 10:10PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. The Uber logo is displayed on a mobile phone in this picture illustration

By Greg Roumeliotis, Akanksha Rana and Lisa Baertlein

(Reuters) - Uber Technologies (NYSE:UBER) Inc is in negotiations to buy online food delivery company Grubhub Inc in an all-stock deal, according to people familiar with the matter.

A merger could give Uber Eats' money-losing restaurant delivery service a leg up on market leader DoorDash at a time when the coronavirus pandemic has upended Uber's core business of shuttling people from place to place.

Uber and Grubhub are still haggling over the deal's stock exchange ratio, and there is no certainty that they will reach an agreement, the sources said.

The potential acquisition suggests that the Silicon Valley disruptor is doubling down on its fastest-growing service in a scramble to adapt to what is likely to be a long business interruption.

"This would be an aggressive move by Uber to take out a major competitor on the Uber Eats front and further consolidate its market position," Wedbush analysts said in a client note.

It could turn the crowded "U.S. meal delivery market into a two-horse race," CFRA Research analyst Angelo Zino said.

Shares of Grubhub closed up 13.6% at $60.39, while Uber's gained rose 2.4% to $32.40.

An Uber spokesman said the company does not respond to "speculative M&A." Grubhub, in a statement, did not confirm the talks but said "consolidation could make sense in our industry."

Experts say consolidation is long overdue in the space, where demand from worried, home-bound consumers is surging.

DoorDash had a 42% share of meal delivery sales in March 2020, versus 20% for Uber Eats and 28% for Grubhub, data from analytics firm Second Measure showed.

"If you can't beat 'em, eat 'em," said Jesse Reyes, chief executive of J-Curve Advisors, who advises venture capital and private equity funds.

FEEDING FRENZY?

The value of the deal was undisclosed.

Grubhub had a market capitalization of about $4.3 billion, while Uber was valued at nearly $55 billion as of Monday's close, according to Refinitiv data.

Bloomberg News first reported on the deal talks earlier on Tuesday.

Uber "can wait a bit longer and probably get them cheaper. But it could be that you have a lot cats circling the same bowl," Reyes said.

Uber Eats' first-quarter revenue soared more than 50% to $819 million after restaurants across the country shuttered their dining rooms to curb the spread of the novel coronavirus.

The service, available in more than 6,000 cities worldwide, has been a drag on Uber's bottom line since its 2014 inception due to heavy spending on customer promotions and driver incentives.

Uber in January sold its Indian food business to local rival Zomato and earlier this month closed Eats operations in eight countries.

Last week, Grubhub said the restaurant industry was facing enormous challenges from the COVID-19 pandemic, and vowed to use nearly all of its second-quarter profits to help drum up business for its restaurant partners.

Those comments came amid growing concern from lawmakers and the restaurant industry about the negative influences of so-called "gig economy" companies.

Democratic U.S. Representative David Cicilline, of Rhode Island, who chairs the House Antitrust Subcommittee, said the deal underscores the need for the merger moratorium that he and his colleagues have been calling for.

"Uber is a notoriously predatory company that has long denied its drivers a living wage. Its attempt to acquire Grubhub - which has a history of exploiting local restaurants through deceptive tactics and extortionate fees - marks a new low in pandemic profiteering," he said.

Andrew Rigie, executive director of the New York City Hospitality Alliance, said Grubhub and other big delivery platforms continue to increase rates, control valuable customer data, and use sophisticated techniques and discounts to funnel customers to their own websites instead of those of their partner restaurants.

"Further consolidation of the industry poses significant concerns," Rigie said.

Antitrust experts said the deal, if signed, would likely win approval from regulators.

"I think this deal is doable. It does not seem to me to be an excess of concentration," said Seth Bloom of Bloom Strategic Counsel. "Probably the restaurants will not like it and will express concern but I don't think that will carry the day."

Other experts told Reuters they expected a lengthy review.

Uber approaches Grubhub with acquisition offer: sources
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Ben Dover
Ben Dover May 12, 2020 9:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They post billions 8n losses..fire people..claim to have no money yet want to buy a company???with share price higher then theirs???ehat is this malarkey???that should dive nicely back to reality end of the week..
Luis Cortes
Luis Cortes May 12, 2020 6:55PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
never turned a profit yet buying a competitor in all stock deal...nice
Dado Pavic
Dado Pavic May 12, 2020 6:55PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
amazon didnt turn a profit either during a decade of growth and expansion. Its revenue caught up over time.
Gamer Turtle
GamerTurtle May 12, 2020 6:26PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
fired 3700 employees due to cash crunch, then turns around buying GrubHub. lol
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email