Partnerships / Acquisitions

Uber Eyes Postmates Buy

Uber Technologies may have lost out on a bid to buy Grubhub this month, but that hasn’t stopped the global ride-hailing company from setting its sights on another food delivery service.

The San Francisco-based conglomerate is negotiating to buy Postmates Inc. for $2.6 billion, sources told The Wall Street Journal.

Purchase of the 9-year-old meal delivery startup would consolidate the nation’s food delivery market.

If the deal closes, the purchase could boost UberEats, the ride-hailing startup's food delivery service. Since March, the nation’s dining rooms have been shuttered in response to the COVID-19 pandemic while customers flocked to UberEats, Grubhub, Postmates and DoorDash for their meals.

By joining forces and cutting costs, the companies could make the food delivery service profitable.

While Americans are shut in amid the pandemic and ordering more meals online to be delivered, food delivery companies say they are losing money on orders or breaking even, the report said.

Postmates, also based in San Francisco, is the smallest among the major U.S. food delivery players, with 1,000 employees, the report said. The company has raised $906 million and was valued at around $2.4 billion in 2019, according to PitchBook.

Two weeks ago, Uber’s effort to purchase Grubhub collapsed. The Netherlands company Just Eat Takeaway.com NV, agreed to acquire Grubhub for $7.3 billion as part of an agreement that creates one of the largest meal delivery companies in the world.

A source told the WSJ that Uber was trying to finalize the deal quickly because a private equity buyer was also competing to buy Postmates.

The deal comes as Postmates was planning a potential initial public offering (IPO), a strategy sometimes used by startups alongside a potential sale. Postmates has also talked with other potential buyers, the report said.

Lawmakers on Capitol Hill raised questions about whether regulators would approve Uber’s purchase of Grubhub. Uber’s acquisition of Postmates would face less regulatory opposition following Grubhub’s combination with Just Eat Takeaway, a source told the Financial Times.

Dara Khosrowshahi, Uber’s CEO, has said the company would exit food delivery markets in which it wasn’t a dominant player. But the meal business has taken on new weight and significance as the company’s core ride-hailing operation suffers amid pandemic-triggered lockdowns, the Journal reported.

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