It looks like a much-anticipated Uber Eats-Grubhub merger that might have changed the entire food delivery landscape won’t be coming to fruition after all. Uber is reportedly looking increasingly likely to pull out of merger talks, as antitrust concerns around the potential deal have started to spring up.
The possibility of such a tie-up had already raised alarms from several Democratic lawmakers. Sens. Amy Klobuchar (D-Minn.), Richard Blumenthal (D-Conn.), Patrick Leahy (D-Vt.), and Cory Booker (D-N.J)., recently sent a letter to top antitrust officials requesting an especially sharp look at the potential merger.
Previous reporting had also indicated that Uber and Grubhub were already struggling to agree on a price for the deal, although analysts believed that was resolvable. However, antitrust roadblocks look a good deal more unsurmountable.
The news will undoubtedly be celebrated by some Democratic lawmakers, along with restaurateurs who feared that a combined Uber-Grubhub entity would have the power to charge incredibly high delivery fees. That would be particularly true in a post-pandemic world, where more than a quarter of consumers have shifted to online restaurant ordering since the pandemic began in early March and the fate of in-house dining remains unclear.
But however happy some restaurateurs might be about the deal’s apparent demise, the future does seem to point to more consolidation and increased interstate competition among food delivery’s bigger players. Even if Grubhub isn’t pairing up with Uber, that doesn’t mean it’s not pairing up. And Uber wasn’t the only big name looking to take a big step into food delivery.
Here’s a look at what’s likely to happen next in the sector:
Grubhub Might Merge With Someone Else
The Wall Street Journal reports that Grubhub is now nearing a deal to combine with Netherlands-based food-delivery firm Just Eat Takeaway.com instead of Uber Eats. The company is reportedly formulating an all-stock offer for Grubhub that it could finalize as soon as the end of Wednesday (June 10).
A Grubhub deal would represent a second massive merger for Just Eat Takeaway, which formed earlier this year via an $11.1 billion merger of the U.K.’s Just Eat and Netherlands-based Takeaway.com. The combined firm is one of the European food-delivery sector’s larger players, but lacks a U.S. presence, according to the news outlet. Buying Grubhub could provide that, theoretically with fewer antitrust concerns than an Uber deal would entail.
However, the Journal said an all stock deal might need sign-off from Just Eat’s shareholders, who might not grant it. In the meantime, CNBC reported that there’s also a possibility that Grubhub could merge with Germany-based Delivery Hero.
Amazon Edges Into The Game
While the potential pair-up between Uber Eats and Grubhub has captured most of the recent attention, it’s notable that Amazon is also slowly nudging its way into food delivery.
Britain’s competition regulator announced Wednesday that it will need two more months to make a final ruling on Amazon’s purchase of a minority stake in online-delivery group Deliveroo.
Amazon led a $575 million funding round for Deliveroo in May 2019, making what the two parties called “a minority investment” aimed at helping Deliveroo level up its competition again Uber Eats and Just Eat Takeaway.com.
But Britain’s Competition and Markets Authority (CMA) launched a detailed investigation of the deal in December, according to published reports. The CMA provisionally cleared the deal in April in light of the damage the coronavirus crisis was doing to Deliveroo’s revenues, and the fact the firm could go out of business while waiting to accept Amazon’s money.
A final ruling was due this Thursday (June 11), but the CMA has now given itself until Aug. 6 to issue that. “In taking this decision, the [CMA] had regard to the need to take full account of representations received from the parties and third parties in response to the provisional findings and to reflect the impact of coronavirus ... in its assessment,” the agency said on Wednesday.
Will The Industry Deliver Consolidation?
What does all of this mean for the food delivery market long term?
Much remains unknown, as consolidation efforts are ongoing and antitrust regulators are closely watching everything. Consumer habits also remain in flux as restaurants reopen dining rooms and the public decides if eating out feels safe enough to risk.
For now, keep watching. We imagine there are many more exciting developments in the competitive food-delivery world to come — and in the not-too-distant future.