Uber says to approach Grubhub with takeover offer

Uber is in negotiations to buy the online food delivery company Grubhub as part of a share transaction, according to people familiar with the matter.

Merger could give lost money to Uber Eats restaurant delivery service an edge over market leader DoorDash at a time when the coronavirus pandemic has disrupted Uber's core business of move people from one place to another. other.

Uber and Grubhub are still haggling over the deal's deal relationship, and there is no certainty that they will reach a deal, the sources said.

The potential acquisition suggests that the Silicon Valley disruptor is doubling its fastest growing service in a struggle to adapt to what is likely to be a long disruption in business.

"It would be an aggressive move by Uber to eliminate a major competitor on the Uber Eats front and further consolidate its market position," Wedbush analysts said in a client note.

This could transform the "US food delivery market into a two horse race," said Angelo Zino, an analyst at CFRA Research.

Grubhub shares closed 13.6% at $ 60.39 (approximately Rs. 4,500), while Uber's profits rose 2.4% to $ 32.40 (approximately Rs. 2,400) ).

A spokesperson for Uber said the company did not respond to "speculative mergers and acquisitions". Grubhub, in a statement, did not confirm the talks, but said "consolidation could make sense in our industry".

Experts believe that consolidation is long overdue in space, where demand from affected and confined consumers is increasing.

DoorDash had a 42% share of food delivery sales in March 2020, up from 20% for Uber Eats and 28% for Grubhub, data from analyst firm Second Measure showed.

"If you can't beat them, eat them," said Jesse Reyes, managing director of J-Curve Advisors, who advises venture capital and private equity funds.

Feed the frenzy?
The value of the deal has not been released.

Grubhub had a market capitalization of around 4.3 billion dollars (around Rs. 32.4 billion rupees), while Uber was valued at around 55 billion dollars (around Rs. 4.14 lakh crores) at the end of Monday, according to Refinitiv data.

Bloomberg News First reported Tuesday on settlement negotiations.

Uber "can wait a little longer and is probably cheaper. But you may have a lot of cats running in the same bowl," said Reyes.

Uber Eats' first quarter sales soared more than 50% to $ 819 million (about Rs. 6,170 crore) after restaurants across the country closed their dining rooms to stop the spread of the new coronavirus.

Available in more than 6,000 cities worldwide, the service has been a drag on Uber's bottom line since its inception in 2014 due to high spending on customer promotions and incentives for drivers.

In January, Uber sold its Indian food business to local rival Zomato and, earlier this month, closed state operations in eight countries.

Grubhub said last week that the restaurant industry was facing enormous challenges due to the COVID-19 pandemic and promised to use almost all of its second quarter revenue for help stimulate the activity of its catering partners.

These comments came amid growing concern from legislators and the restaurant industry about the negative influences of so-called "concert economy" companies.

U.S. Democratic Representative David Cicilline of Rhode Island, who chairs the House subcommittee against monopolies, said the deal underscores the need for the merger moratorium he and his colleagues are calling for. .

"Uber is a notoriously predatory company that has long denied its drivers a living wage. Its attempt to acquire Grubhub, which has a history of operating local restaurants through deceptive tactics and exorbitant fees, marks a new dip in the profit pandemic. "

Andrew Rigie, CEO of the New York City Hospitality Alliance, said that Grubhub and other large delivery platforms continue to increase fees, monitor valuable customer data and use sophisticated techniques and discounts to channel customers to their own websites. than those of its associated restaurants. .

"The further consolidation of the industry raises important concerns," said Rigie.

Antitrust experts have said the deal, if signed, would likely get regulatory approval.

"I think this agreement is workable. It doesn't seem to me like excessive concentration," said Seth Bloom of Bloom Strategic Counsel. "Restaurants probably won't like this and they will express their concern, but I don't think it will happen someday."