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Uber expands food delivery business in a $2.65 billion acquisition

The multinational ride-hailing service company, Uber has agreed on a deal aimed at expanding its food delivery business with the acquisition of food delivery app, Postmates Inc, in a $2.65 billion all-stock take over which is expected to be announced as soon as Monday, July 6, 2020. 

According to Bloomberg, the deal which has been approved by the board of directors of Uber, will have the head of Uber’s food delivery business, Pierre-Dimitri Gore-Coty, to continue to run the combined delivery business. Under the agreement, Postmates Chief Executive Officer, Bastian Lehmann and his team will continue to manage Postmates as a separate service. 

This deal would help Uber expand its market share against privately held DoorDash Inc, the current market leader in US food delivery business. While Postmates lags behind DoorDash in the race for market share, it has still been able to maintain a strong position in Los Angeles and the American Southwest, both of which could be available to Uber eats. 

Uber and Postmates who have been in discussion for about 4 years, intensified the acquisition talk about a week ago, after an approach by Uber. This move is coming on the heels of the failed bid by Uber to acquire publicly quoted GrubHub Inc, which was bought over by Europe’s Just Eat Takeaway.com NV for $7.3 billion. 

Postmates’ valuation was last put at $2.4 billion when it raised $225 million in a private fundraising around last September. According to analytics firm, Second Measure, they account for 8% of the US meal delivery market in May.  

Postmates, which was founded in 2011 was one of the first to let customers in the U.S. order meal delivery using a mobile app. However, competition has intensified in recent years and Postmates has fallen to a distant fourth. The company said in February 2019 that it had filed paperwork confidentially for an initial public offering but never went public.  

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