Uber Reportedly In Talks To Acquire GrubHub

Uber Reportedly In Talks To Acquire GrubHub

The deal could shake up the large, if generally unprofitable American food delivery market, a space contested by Uber's Uber Eats service, Grubhub, DoorDash and Postmates.

Commenting on the takeover reports, Wedbush analyst Ygal Arounian said he viewed a potential deal as both an "offensive and defensive" move for Uber.

A merger would see Uber take control of 55 percent of the food delivery market by buying market strength in cities like NY and Chicago, according to a Wedbush analyst note. They will remove a major competitor and expand its scale and ability to offer food delivery services to a wider market.

Uber said last week that revenue in its Uber Eats meal delivery business grew 53% to $819 million in the first quarter, but it reported a $313 million adjusted loss for the division.

News of the acquisition talks sent shares of GrubHub up almost 30 percent Tuesday, but they slipped slightly by 3.7 percent Wednesday as details of firm numbers remained scarce.

Forte said a combination of the two companies would likely receive close scrutiny from regulators, especially since the restaurant industry is struggling during the pandemic.

Furthermore, Arounian would expect significant cost-saving opportunities from a combined company, particularly in sales and marketing expenses, but also in technology, and headcount, which can go a long way in "alleviating the gross margin pressure driven by the actual cost to deliver meals". USA restaurant sales were down 43% the week of April 12, but have picked up slightly since then, according to NPD Group.

"We can not allow these corporations to monopolize food delivery, especially amid a crisis that is rendering American families and local restaurants more dependent than ever on these very services", Cicilline said in a statement.

Absorbing Grubhub would solve two problems for Uber.

The discussions are a sign of how thoroughly the coronavirus has upended everything from the way that people are eating to how businesses must shift to find new growth.

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