Another major obstacle has emerged in Uber’s bid to buy Grubhub: The food-delivery service wants a big payoff if federal regulators nix the deal.
As previously reported in this space, some Democrats in Congress are calling for a U.S. Justice Department probe of the deal over antitrust issues. Lawmakers were already concerned about the fees such companies charge restaurants and their treatment of workers.
Delivery fees range from 10 percent to as much as 40 percent. As a result, some local government have looked at instituting caps on the fees allowed, at least until pandemic shutdowns are eased.
Uber Eats and Grubhub are two of the three biggies in the food-delivery world. According to a letter from lawmakers to regulators, their merger would mean that in New York City, for example, the combined company would have a 79 percent share of the market.
COVID-19 shutdowns have increased the demand for meal delivery, with many restaurants otherwise shuttered around the country. The third big player in the market is DoorDash.
Bloomberg reported that, with regulators in mind, Grubhub wants a reverse breakup fee if U.S. regulators scrub the all-stock deal. The two companies are still in negotiation.
Sources said Uber is arguing that because the deal values Grubhub stock at a premium price it should be a good enough offer.
However, coronavirus shutdowns have damaged the economy. According to the Congressional Budget Office, the final financial toll will likely be a reduction of $7.9 trillion to the U.S. gross domestic product until 2030.
The unstable economy has pushed to the forefront the issue of termination fees, which have one party to the deal paying the other a charge if it falls through.
Ride-hailing giant Uber made its offer to Grubhub in early May. The two companies reportedly came close to an agreement on the issue of price, but are now engaged in back-and-forth talks over breakup fees.
Neither company has issued any direct statement on the matter.