Uber Technologies Inc. has proposed to obtain Grubhub Inc., in a move that would build out its food-delivery platform even as it screens parts of its service abroad, according to people known to this matter.
The companies are in discussion about a deal and could reach an agreement as soon as this month, said the people, who specified not to reveal their identity because the matter isn’t disclosed publically. Discussions are on, and talks could still come to nothing, the people said.
Grubhub said in a statement: “Consolidation could make sense in our industry, and, like any responsible companies, we’re always looking at value-enhancing opportunities. That said, Uber remains confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.” Uber said it wouldn’t “Respond to speculative M&A premiums”, and that the company is “constantly on a lookout at ways to provide more value to Uber’s customers, across all of the businesses we operate.”
Grubhub shares reached as much as 39% in New York trading after being temporarily stopped. They were up 36% at 2:09 p.m., valuing the company at $5.8 billion. Uber, with a market value of about $59 billion, rose as much as 8.2%.
Uber is screening its food-delivery section, Uber Eats, in places where the services have proven to be unpopular like the seven countries it said last week. Those markets depicted 1% of the total bookings and 4% of the business’s altered losses before interest, depreciation, and taxes for the first four months of 2020, the company said.
The prevailing situation of Covid-19 has hampered uber’s booking rides and paying for car service through a smartphone app, but delivering of food has helped them to manage sales as people are indoors saying the San Francisco-based company. Still, the food delivery industry remains not so profitable, even as the mass population depends on delivery to stay indoors at home.
Though the losses have led to much of guesswork on potential mergers in the industry, high private estimates and regulation concerns have made some food-delivery players rigid to striking a deal. Those issues may not be challenging to get better for Uber and Grubhub, which announced food delivery as a significant growth area for the company in its public offering last year.
A deal “would help consolidate the U.S. online food delivery market and reduce cash burn,” Intelligence of Bloomberg senior industry analyst Mandeep Singh mentions in a note on Tuesday.
For now, startups Postmates Inc and DoorDash Inc. and. have increased a cut-throat force on the online company founded in 2004 Grubhub. Grubhub has grown large in doing self-delivery after years of performing as a marketing plan of action for restaurants to arrange their supplies. The competition has compressed Grubhub’s limits, with the coronavirus adding more coercion that forced the company to take off profit targets. Uber, has similarly slowed down its aim to reach altered profitability up to sometime in 2021.