With the aim of furthering its reach in the food delivery business and with the novel coronavirus pandemic spurring up demand for home delivered food, United States based ride hailing company Uber Technologies has decided to acquire Postmates Inc in a deal worth $2.65 billion.
It was just a few weeks ago that Uber was denied an acquisition deal for the online food delivery firm Grubhub. That deal could have helped the loss making food delivery business of Uber to better rival the market leader DoorDash.
Grubhub, the US online food delivery company, chose to be acquired by Just Eat Takeaway.com NV in June for a $7.3 billion deal.
Since the novel coronavirus pandemic hit the world, Uber’s core business of ride hailing was hit hard because of lockdowns and travel restrictions imposed by governments across the world to prevent the spread of the pandemic.
In the deal to acquire Postmates, Uber offered a premium of about 10% on Postmates’ last valuation of $2.4 billion. The news of the acquisition saw Uber shares rise by 9% in pre-market trading.
“As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100% year on year,” said Uber Chief Executive Officer Dara Khosrowshahi.
Uber said in a statement that it currently estimates that about 84 million shares of common stock will be issued by it for 100% of the fully diluted equity of Postmates.
Uber added that the deal has been approved by the boards of both the companies and a commitment to support the transaction has been lent by stockholders representing a majority of Postmates’ outstanding shares.
The core business of Postmates is to deliver to consumer’ doorstep food and other products from restaurants and stores and the company currently operates in 4,200 cities in the US.
One of the many taglines of the company reads: “Have chips but no guac? Postmate it.”
According to analytics firm Second Measure, as of May this year, about 8 per cent of the meal delivery market of the US is accounted for by the San Francisco-based Postmates which was founded in 2011. The biggest player in food delivery in the US market is DoorDash which has a 44 per cent market share.
$225 million was raised in a private fundraising round by Postmates in September last year. In June last year, $400 million from private investors was raised by company’s biggest rival, Doordash, in June when the company was valued at $16 billion.
(Adapted from Reuters.com)