Uber in talks to buy online food delivery company Grubhub

Uber Technologies is in negotiations to buy online food delivery company Grubhub in an all-stock deal, Reuters reported.
Uber Eats network
A merger could give Uber Eats’ money-losing restaurant delivery service a leg up on market leader DoorDash at a time when the coronavirus pandemic has upended Uber’s core business of shuttling people from place to place.

“This would be an aggressive move by Uber to take out a major competitor on the Uber Eats front and further consolidate its market position,” Wedbush analysts said in a client note.

It could turn the crowded “U.S. meal delivery market into a two-horse race,” CFRA Research analyst Angelo Zino said.

DoorDash had 42 percent share of meal delivery sales in March 2020, versus 20 percent for Uber Eats and 28 percent for Grubhub, data from analytics firm Second Measure showed.

Grubhub had a market capitalization of about $4.3 billion, while Uber was valued at nearly $55 billion as of Monday’s close, according to Refinitiv data.

Uber Eats’ first-quarter revenue soared more than 50 percent to $819 million after restaurants across the country shuttered their dining rooms to curb the spread of the novel coronavirus.

The service, available in more than 6,000 cities worldwide, has been a drag on Uber’s bottom line since its 2014 inception due to heavy spending on customer promotions and driver incentives.

Uber in January sold its Indian food business to local rival Zomato and earlier this month closed Eats operations in eight countries.

Last week, Grubhub said the restaurant industry was facing enormous challenges from the COVID-19 pandemic, and vowed to use nearly all of its second-quarter profits to help drum up business for its restaurant partners.

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