Uber Agrees To Buy Postmates For $2.65BN In Stock After Losing Battle For GrubHub Tyler Durden Mon, 07/06/2020 - 08:16
After failing to convince GrubHub's millennial managers that a tie-up would be mutually beneficial, Uber has moved on to the next-best thing and agreed to buy Postmates in a $2.65 billion all-stock deal, according to Bloomberg.
Uber Eats head Pierre-Dimitri Gore-Coty is expected to continue to run Uber’s combined delivery business, according to a person who asked not to be identified discussing a private deal. Under their agreement, Postmates Chief Executive Officer Bastian Lehmann and his team will stay on to manage Postmates as a separate service, another person said.
As the coronavirus resurgence drives millions of Americans back indoors, Uber management sees food delivery as a critical market that Uber must dominate (at least in the US) to ever have a hope of finding long-term profitability. Last year, WSJ published a series of stories outlining how app-based third-party food-delivery is a money-losing proposition, and has been propelled, so far, by a surfeit of VC capital. As one executive remarked to WSJ in the series, the problem with food delivery is that a single delivery driver can only deliver 2-3 meals in an hour, tops (and that's assuming he's working in a crowded urban environment like NYC).
Uber and Postmates have reportedly been holding talks on and off for about four years now, but the deal talks accelerated about a week ago as Uber's interest intensified, per BBG. The move for Postmates, of course, follows Uber’s failed bid to capitalize on the March market rout and acquire GrubHub, which was instead scooped up by Europe’s Just Eat Takeaway.com NV for $7.3 billion.
Postmates dominates the food delivery market in LA and parts of the Southwest, though its footprint is limited outside those markets. Uber's board has reportedly already OK'd the deal.
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