After speculations of possible acquisition emerged last week, the ride-hailing giant has now confirmed its recent deal with food delivery company Postmates.
It seems like the competition between food delivery services will ensue now that Uber strikes a deal with Postmates. In a report first published by Bloomberg, the ride-hailing company is said to purchase the food delivery company by an all-stock takeover of US$2.65 billion[AU$3.80 billion].
The report was eventually confirmed later Monday, July 6.
The Uber-Postmates deal
A month after it failed to buy GrubHub against Europe’s Just Eat Takeaway, Uber has now finally set its foot in the food delivery business. It appears that, with its ride-hailing service still in negative, the company is planning to stretch its services by tapping the booming market of food delivery.
In a statement posted by Businesswire, CEO Dara Koshrowshahi said:
“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery. […] We are thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country.”
The deal, as per Bloomberg, is said to give Uber Eats head Pierre-Dimitri Gore-Coty the position to run both the company’s delivery services. Bastian Lehmann, Postmates’ Chief Executive Officer, together with his team, will also stay to manage Postmates as a separate service.
A source also said the two companies had been privately holding discussions on and off concerning the announced acquisition for nearly four years. But, Uber approached the food delivery business last week and finally made progress, causing speculations to emerge a week ago.
Uber previously announced its acquisition of GrubHub (another food delivery service) but lots against Europe’s Just Eat Takeaway, which bought the food delivery business for $7.3 billion.
Uber’s move to acquire Postmates had investors racing to buy stocks, pushing the ride-hailing company’s shares to climb as much as six percent to $32.52 on Monday.
Uber taps the growing market of food delivery business
Upon its announcement, the ride-hailing company also said that Postmates’ business is “highly complementary” to Uber Eats. It noted that Postmates has excellent relationships with small and medium-sized restaurants, adding that both companies’ geographic as well as demographic focus vary.
With that, Uber emphasized that both companies will build tools and technologies for their restaurant and merchant partners.
“We are in the unique position of having the Eats business to offset headwinds in our rides business significantly,” Khosrowshahi told CNBC.
Uber’s core business, which is its ride-hailing service, is still in negative as coronavirus cases still increasing across the U.S. According to CEO Dara Koshrowshahi, its ride business fell 75% in the second quarter from previous year’s revenue. But as it entered the third quarter, bookings slightly rallied with less than a 60% decline.
Meanwhile, Uber Eats booking rose more than twice in the second quarter, per Uber’s recently published data. On the one hand, Postmates sales increased by 67%.