- Uber has made an offer to buy rival delivery service GrubHub, multiple news outlets reported Tuesday.
- Shares of GrubHub spiked as much as 38% following the reports before trading of the stock was halted around 1 p.m. ET.
- Grubhub did not confirm or deny the reported Uber acquisition talks in a statement, but said that “consolidation could make sense in our industry.”
- Uber has relied on Uber Eats to make up for severe losses in its main ride-hailing business amid the coronavirus.
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Uber has made an offer to buy the delivery service Grub Hub,Bloomberg News, The Wall Street Journal, and Reuters reported Tuesday, citing people familiar with the matter.
A deal could be reached by June, according to Bloomberg’s sources, who also caveat that the talks could also end with no agreement. According to the Wall Street Journal, one offer raised by GrubHub would give investors 2.15 shares of Uber for every share of GrubHub they own.
Shares of GrubHub surged as much as 38% before trading of the stock was halted around 1 p.m. ET. Uber’s stock price rose about 7%.
GrubHub’s market value was about $US5.7 billion dollars on Tuesday, Uber ended the first quarter with roughly $US9 billion in cash or cash equivalents on its balance sheet, making a deal very feasible.
Uber did not respond to a request for comment. In a statement, GrubHub did not confirm or deny the talks, but said consolidation could “make sense” in the food-delivery industry.
“We remain squarely focused on delivering shareholder value,” it said. “As we have consistently said, consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”
Uber has relied heavily on its Uber Eats food-delivery arm in recent months to make up for severe losses in its main ride-hailing business thanks to the coronavirus pandemic.
A potential purchase or investment in GrubHub could align with Uber’s stated plans to be either the No. 1 or No. 2 player in any market where it does business. As part of those plans, Uber exited seven countries last week, but other deals are not out of the questions.
In Uber’s annual shareholders meeting on Monday, chief executive Dara Khosrowshahi told investors that the company was always evaluating potential acquisitions.
“We are in dialogue with many players,” he said, “and because of our being Uber, the biggest player in this area, the global player, you can imagine that we’re having lots of conversations. We always have those conversations with an eye towards continuing to build a great service long-term and maximise shareholder value along with it.”
In October, Uber announced an agreement to acquire Cornershop, a grocery-delivery startup operating in Latin America. That move had industry watchers predicting other deals soon.
“Companies like Uber – that has this mysteriously high stock price considering how the company is performing – are likely to be very acquisitive because the market has given them stock to go buy companies,” Ian Sigalow, cofounder of the venture capital firm Greycroft, told Business Insider on May 5.
“I think they understand intuitively that if they don’t buy, then their competitors will, and they’d be missing out on a potential once-in-a-lifetime opportunity.”
A deal for GrubHub could give Uber clear dominance when it comes to third-party delivery, according to analyst Daniel Ives of Wedbush. He estimates the combined market share could be 55%, but warns other competitors like Doordash could also bid.
“Any acquirer of Grubhub would ultimately be buying specific market strength, like NYC, Boston, and Chicago, at a premium in order to speed up rationalization through market share dominance,” he said in a note to clients.
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