Uber will acquire food delivery service Postmates in a $2.65 billion all-stock deal intended to give the ride-hail company a much-need jolt after its offer to buy Grubhub fell apart amid antitrust scrutiny.

Postmates’ app will continue to run separately after the acquisition, but it’ll be able to tap into a merchant and delivery network combined with Uber Eats. Uber says this will mean more restaurant options for consumers and more efficient deliveries for drivers who pick up multiple orders at a time. The companies intend for the deal to close in Q1 2021.

Uber desperately needs its meal delivery division, Uber Eats, to make up for the huge losses it’s been experiencing since the start of the coronavirus pandemic. Food delivery is not profitable, nor is Uber’s core ride-hailing business. But the company is hoping that with restaurants closed to in-person dining, more people will be ordering takeout in the future.

The virus has taken its toll on Uber, with riding-hailing down about 80 percent. And with the number of cases spiking in many parts of the US, the company’s losses could continue to mount. Meanwhile, bookings in its Uber Eats division were up more than 54 percent year over year, thanks to increased demand for food deliveries, the company reported in May.

Uber Eats is an obvious bright spot, but it’s still under immense strain, thanks to regulatory pressure and competition from Grubhub and DoorDash. Uber Eats has sen an acceleration in demand since mid-March, with 89 percent year-over-year gross bookings growth in April excluding India. And the company is also abandoning its unprofitable markets at a steady clip. Uber recently shuttered its Eats business in eight cities.

But despite these gains, Uber is still trailing behind DoorDash, the leader in food delivery. In June, DoorDash captured 45 percent of transactions, according to market research firm Edison Trends. By purchasing Postmates, Uber can improve its marketshare to 37 percent, from its current position of 29 percent.

Uber attempted to buy Grubhub earlier this year, but the deal fell apart amid reported antitrust scrutiny, and Grubhub ended up going to European service Just Eat Takeaway for $7.3 billion.

Postmates, which is headquartered in San Francisco, helped revolutionize the food delivery segment when it launched in 2011. The company had been planning to go public in October but reportedly told its advisers market conditions were suboptimal and delayed the filing. Fox Business reported recently that the plan is back in motion, with the food delivery service planning to file paperwork for an initial public offering within days.

Source: The Verge

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