Uber in Talks to Acquire Grubhub Amid Delivery App Backlash
The consolidation of the online restaurant delivery industry has been a winding two-decade journey. For instance, Grubhub—one of the four largest companies alongside DoorDash, Uber Eats, and Postmates—merged with Seamless in 2013, which itself had acquired MenuPages in 2011. It's just one example of how the bigger fish have swallowed the smaller ones; and now, a big fish is eyeing up Grubhub for dinner: Uber.
On Tuesday, industry sources revealed that Uber has approached Grubhub about a possible acquisition, but just how close the two sides are to an agreement is still a mystery. Out of the gate, Bloomberg—one of the first to report the talks—suggested that a deal could be finalized as soon as this month. However, CNBC explained that the companies "have been in acquisition talks off and on for about a year," which could be interpreted in opposing ways: Maybe this recent leak means something is about to happen, or maybe the prolonged talks mean they aren't able to find common ground.
The Wall Street Journal reports that Uber initially suggested an all-stock takeover of Grubhub in February—which is when the paper says talks began in earnest—but that Uber rejected Grubhub's most recent offer as too high. (Apparently, the offer was 2.15 shares of Uber for every share of Grubhub. As a whole, Uber's total market value is about ten times more than Grubhub's.)
"As we have consistently said, consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities," Grubhub said in a statement. "That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment."
A deal between Grubhub and Uber would seem to make sense for both sides. Once America's largest delivery service, Grubhub has seen its market share slip as DoorDash has grown steadily to become the top delivery brand with service in all 50 states. And yet, Grubhub has still remained in the crosshairs of investigations into restaurants delivery services, exacerbated by a handful of publicized scandals over the past year. As a result, despite having the operational capabilities, Grubhub's overall reputation (and stock value) has taken a hit; an Uber acquisition could potentially be a fresh start.
By combining forces with Grubhub, Uber Eats would immediately control about 48 percent of the market compared to DoorDash's 42 percent, according to Nation's Restaurant News. As a Bloomberg analyst wrote yesterday, consolidating the online delivery market down to just two top players (Postmates would become a distant third) would "reduce cash burn."
Still, all sources involved seemed to agree on at least one thing: The talks are far from finalized, and any potential deal could still fall through.