Shares in Uber jumped by 4% after it acquired food-delivery platform Postmates for $2.65bn, says Bloomberg. The deal, designed to bolster Uber’s food arm Uber Eats, is the culmination of four years of discussion. It follows Uber’s failed bid to acquire GrubHub, which was instead “scooped up” by Just Eat Takeaway.com for $7.3bn. Postmates was “one of the first to let customers in the US order meal delivery using a mobile app”.
The deal, which will keep the Postmates app running separately for now, suggests that Uber, “under pressure” as its core ride-hailing business reels from global lockdowns, is “trying to expand its reach in the food-delivery business”, says Michael Cogley in The Daily Telegraph. In particular, Uber Eats is keen to dislodge DoorDash from its spot as the food-delivery market leader in the US.
While Postmates’ 8% share of the overall US market is much smaller than Uber Eats’ 22%, it has important “strongholds” in the southwest of the US and in the city of Los Angeles. The deal won’t change the “woeful” economics of food delivery, especially since both companies are currently losing money, says Jennifer Saba on Breakingviews. What’s more, even though Postmates has a relatively small share of the market, regulators will certainly want to “take a close look at the deal’s effect on competition”.
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Still, there are benefits, including an estimated $200m in cost savings achieved by “slashing overhead, sales and marketing”. The merger will also give an indication as to “how regulators will respond to the $55bn ride-hailing firm’s future acquisitions”.
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