Uber has bought food-delivery service Postmates for $2.65 billion in stock, the companies announced Monday.
The deal brings together the fourth-largest U.S. food delivery service with Uber Eats, which trails only DoorDash in market share, according to Second Measure and Edison Trends. The companies said Uber intends to keep the Postmates app running separately, “supported by a more efficient, combined merchant and delivery network.”
Uber previously was in the running to buy rival food delivery service GrubHub, but talks broke down as the companies could not agree on a break-up fee, and the ride-sharing company grew frustrated with what it perceived as stalling tactics, CNBC previously reported. GrubHub instead sold to European food delivery service JustEatTakeaway in early June.
Uber is banking on food delivery to help sustain its business during the coronavirus pandemic, as demand for ride-sharing has plunged. In its first-quarter earnings call, Uber said gross bookings revenue for its rides segment was down 80% in April from a year earlier, while gross bookings revenue in eats was up more than 50% during the period.
Postmates has had success in specific urban areas Los Angeles and Miami but has struggled to compete nationally against DoorDash, GrubHub and Uber Eats. Even with Postmates, Uber will still trail DoorDash in food delivery market share, according to Edison Trends. That should help with U.S. regulators, who may have pushed back on an Uber-GrubHub tie-up but could be more likely to accept an Uber-Postmates deal.
Postmates had reportedly filed confidentially for an IPO in February 2019, but delayed its offering later that year amid deteriorating market conditions and tough competition, according to Recode.
Postmates had also been considering restarting the IPO process, as well as an offer from a special purpose acquisition company (SPAC) — essentially a shell company that exists solely to take another company public, CNBC previously reported. The San Francisco-based company was valued at $2.4 billion in its last fundraising round in September, Reuters said.