Name: Uber confirms it is acquiring Postmates in an all-stock, $2.65B deal
Brand: techcrunch.com
SKU: techcrunch-com-274
Availability: OnlineOnly

critic

Uber confirms it is acquiring Postmates in an all-stock, $2.65B deal

preview

Competition continues to heat up in the food delivery wars. In the latest development, Uber today announced that it has in a $2.65 billion, all-stock deal. It plans to run the business alongside its own food delivery business, Uber Eats, keeping the Postmates app running while merging some of the tech and delivery operations at the back end — for example, by having drivers delivering orders for both businesses.The deal confirms reports that last week, and got re-reported last night , that Postmates and Uber were in negotiations. That deal itself sprung up in the wake of Uber failing to acquire another competitor, Grubhub, which was instead by Europe’s takeout behemoth Just Eat Takeaway for $7.3 billion.“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. As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100% 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,” said Uber CEO Dara Khosrowshahi in a statement.“Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand. Joining forces with Uber will continue that mission as we continue to build Postmates while creating an even stronger platform that brings this mission to life for our customers. Uber and Postmates have been strong allies working together to advocate and create the best practices across our industry, especially for our couriers. Together we can ensure that as our industry continues to grow, it will do so for the benefit of everyone in the communities we serve,” said Postmates co-founder and CEO Bastian Lehmann in his statement.Uber in its news announcement described Postmates as “highly complementary” to Uber Eats, citing the two companies’ differing geographic focuses and target demographics and noting that Postmates has strong relationships with small- and medium-sized restaurants and other businesses that are loyal to the Postmates brand, which covers not only food but delivery of other items, too.On the other hand, Uber noted that together they’ll build better tools and technology for their merchant and restaurant partners, and that these will have a wider user base now to tap. That last point somewhat contradicts the lack of overlap between the two, so we’ll have to see how that actually plays out.The all-stock deal valuation that Uber is paying out is a slight bump on Postmates’ last valuation of&nbsp;, which it reached in September 2019 on the back of a private equity round (it had raised just over $900 million in total over 10 years). But with the “money” all in paper, it puts a lot of pressure both on Postmates and Uber to continue to deliver on growth — pun intended.For Uber, Uber Eats has been &nbsp;amid what has otherwise been a very tough life as a publicly listed company. That predicament has taken on a more critical edge in recent months through the COVID-19 pandemic.In its last quarterly earnings results, the Uber Eats business grew 52% and managed to somewhat offset a big decline in its ride-hailing revenues. In both cases, you can draw a line from the results to social distancing requirements that people have been following around the world: consumers have been staying home more and ordering take-out food to be delivered to them; and at the same time they have been staying away from shared, small spaces, such the ones that you might encounter in an Uber ride. However, with the boost at Uber Eats, the company lost $3 billion last quarter.The trend of those numbers is one reason why Uber has been looking to expand its food delivery business. The other is the one that has been motivating the larger consolidation trend in food delivery, and that is the principle of economies of scale and how that plays out in terms of operational expenditures, with single drivers able to cover more restaurants and orders, and also the costs of operating the business.The wider business model requires a lot of subsidising to grow, so taking out a competitor somewhat reduces that kind of costly competitive pressure. It doesn’t eradicate it completely, though: DoorDash and Grubhub (now supercharged with Just Eat Takeaway profits and financial muscle) are still around and will represent strong alternatives both for consumers and restaurants looking for delivery partners.The public markets is a tough place to play out a growth story for a company that is still profoundly in the red like Uber. In that regard, it’s an ironic place for Postmates to land.The latter had&nbsp;

Competition continues to heat up in the food delivery wars. In the latest development, Uber today announced that it has in a $2.65 billion, all-stock deal. It plans to run the business alongside its own food delivery business, Uber Eats, keeping the Postmates app running while merging some of the tech and delivery operations at the back end — for example, by having drivers delivering orders for both businesses.The deal confirms reports that last week, and got re-reported last night , that Postmates and Uber were in negotiations. That deal itself sprung up in the wake of Uber failing to...

public

ingridlunden

Journalist. Mom. Wife. Traveler. Speaks English, American, Russian, Franglais, Spanglish, in metaphors. ingrid@techcrunch.com DMs OPEN

Ingrid Lunden

Technology news and analysis with a focus on founders and startup teams. Got a tip? tips@techcrunch.com

Uber confirms it is acquiring Postmates in an all-stock, $2.65B deal

No article scores yet.

CRITIC REVIEWS

PUBLIC REVIEWS