Uber will buy food-delivery startup Postmates for $2.65 billion

  • Uber will buy food delivery firm Postmates for $2.65 billion in an all-stock deal, Uber confirmed on Monday.
  • Postmates was founded by Bastian Lehmann, Sam Street, and Sean Plaice in 2011. It currently only serves the US, and is headquartered in San Francisco.
  • Uber has been circling around several smaller food-delivery businesses over the past few years, attempting to buy GrubHub and the UK's Deliveroo.
  • Visit Business Insider's homepage for more stories.

Uber will buy the food delivery startup Postmates in an all-stock deal worth $2.65 billion, the companies announced Monday, as the ride-delivery firm hopes to bolster a business cratered by the coronavirus. 

Food-delivery has come front and center for Uber since March, when a near complete dropoff in global travel decimated its core taxi business. A combined Uber Eats and Postmates will help Uber chase the current market-leader DoorDash, bringing it to about a 35% market share, according to estimates from Second Measure. DoorDash currently holds about 45%, the firm estimates. 

Shares of Uber surged as much as 9% in early trading Monday following the announcement. 

"Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery—they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19," Uber CEO Dara Khosrowshahi said in a press release.

"As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100 percent year on year. We're 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."

Read more: An Uber Eats executive explains why the suburbs are key to its fastest-growing business area

Uber has been circling around smaller food delivery companies in many markets over the past few years. Most recently, it tried and failed to acquire GrubHub, which was acquired by Europe's Just Eat in June. Uber also held talks with the UK's Deliveroo in 2018, but the two firms couldn't agree on a price. In 2019, it struck a deal with Chilean grocery delivery firm Cornershop, which should close soon. 

CEO Dara Khosrowshahi has previously said that Uber will double down in areas where the ride hailing giant can realistically expect to win the market, or be the second-biggest player. This may mean exiting markets where the firm has failed to become the number one or number two player. That strategy has impacted Uber Eats, which sold its Indian business to local player Zomato in January. Uber sold its wider southeast Asian business, including its food delivery arm, to rival Grab in 2018.

"This is an aggressive move by Uber to take out a competitor on the Uber Eats front and further consolidate its market position, especially as the COVID-19 pandemic continues to shift more of a focus to deliveries vs. ride-sharing in the near-term," Dan Ives, an analyst at Wedbush Securities, said in a note to clients about the deal, which is expected to close in the first quarter of 2021, pending approval from US regulatory agencies and Postmates shareholders. 

 

Axel Springer, Insider Inc.’s parent company, is an investor in Uber.Exclusive FREE Report: 30 Big Tech Predictions for 2020 by Business Insider Intelligence

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