Uber approaches GrubHub with takeover offer
Reuters
May 12, 2020
May 12 (Reuters) - Uber Technologies Inc UBER.N is in advanced talks to buy online food delivery company GrubHubInc GRUB.N in an all-stock deal, according to a person familiar with the matter.
The two companies could reach an agreement as soon as this month, Bloomberg News reported earlier on Tuesday, citing people familiar with the matter. (https://bloom.bg/2LoVtoS)
Shares of GrubHub jumped about 29% to $60.50, while those of Uber rose 6%.
GrubHub had a market capitalization of about $4.3 billion, while Uber was valued at nearly $55 billion as of Monday's close, according to Refinitiv data.
Uber said it does not comment on rumors and speculations, while GrubHub declined to comment.
The approach comes as revenue from Uber's restaurant food delivery business, Uber Eats, surged more than 50% to $819 million on a yearly basis in the recently reported first quarter as restrictions imposed to curb the coronavirus forced eateries to shut their dining areas. (Full Story)
UberEats, which offers food delivery services in more than 6,000 cities worldwide, has been a drag on the company's bottom line since its inception in 2014.
Uber in January sold its Indian food business to local rival Zomato and earlier this month closed Eats operations in eight countries. (Full Story) (Full Story)
Meal delivery services saw year-over-year growth of 24%, through the end of March in the United States, with Uber Eats taking in about 20% of consumers' meal delivery sales, data from analytics firm Second Measure showed.
Grubhub and its subsidiaries took in 28% of the sales, according to the data.
"It (the deal) will definitely be scrutinized but I think it will pass. GrubHub and Uber will likely push back saying industry isn't profitable and need to consolidate to make it work," said Robert Mollins, an analyst with Gordon Haskett.
However, the ride-hailing business at Uber and smaller rival Lyft Inc LYFT.O have been suffering due to the travel restrictions and both companies have pulled their full-year outlooks.
Last week, GrubHub said the restaurant industry is facing enormous challenges from the COVID-19 pandemic, and the company is using nearly all of its profits in the second quarter to generate as many additional orders for its restaurant partners as possible.