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Valued at $2.65 billion, the acquisition deal with Postmates will help Uber Eats to expand its network comprising of operation in about 6000 cities across 45 countries.
As a means to expand its food delivery network, Uber Technologies Inc (NYSE: UBER) through its food delivery service Uber Eats has completed its acquisition deal with Postmates as reported by Bloomberg on Sunday. Although the deal has not been made official, the story corroborates the attempt by the Uber subsidiary to acquire similar food delivery networks such as Grubhub Inc in the past years.
The tip on the deal completion between Uber and Postmates has caused a slight jump in the shares of Uber which gained 9.06% in the pre-market on adding $2.78 to peg at $33.46. Consequent to the potential of a wider food network to enhance better business reach, the shares of Uber Technologies have the potential to soar in the months to come.
Uber Eats was the brainchild of Uber which was founded in 2009 as a peer-to-peer ridesharing service business. The company began food delivery in August 2014 with the launch of the Uber Fresh service in Santa Monica, California. As the parent company grew, so also did the food delivery outlet grew in relevance particularly during the coronavirus induced pandemic. Uber Eats earns commissions on food delivered as the most notable way of raising revenue.
Attractiveness of Postmates to Uber Eats
The motives for mergers and acquisitions between firms differ across industries but all are geared towards improving the acquiring business outlook. Uber Eats has been exiting its key base in South Korea, the United Kingdom, Saudi Arabia, and Egypt owing to fierce competition. To make up for these lapses, the company needs a company that helps it consolidate its presence and the Postmates’ Inc negotiation was preceded by that of Grubhub Inc (NYSE: GRUB), which was acquired by Just Eat’s Takeaway.com.
Postmates was founded in 2011 by just and as of February 2019, Postmates operates in 2,940 U.S. cities. Postmate accounts for about 8% of the total food delivery service in May according to the Second Measure analytics firm. The firm’s growth has been a consistent one since its inception.
In June 2015, four years after its debut, while in 2015, the company, in a bid to add more value to its customers updated the app, which added the ability to track delivery, gift meals to others, and the estimated delivery time. Postmates announced that it had surpassed 2.5 million deliveries across 28 markets and expanded its fleet to 13,000 couriers.
Last week, Reuters reported that Postmates had revived plans for an initial public offering following dealmaking in the U.S. online food delivery service sector that sparked acquisition interest in the company and thus presents an opportunity for Uber to acquire the firm in order to consolidate its position in the food delivery business niche.
Possible Implications of the Deal
Valued at $2.65 billion, the potential Postmates acquisition deal will help Uber Eats expand its network comprising of operation in about 6000 cities across 45 countries. With an employee count of over 5500, Uber Eats will have the workforce to deliver on its services. A major contention that sprang up during the COVID-19 lockdown among the food delivery company is the lawsuit owing to an overcharged delivery fee. Should this acquisition pull through, Uber Eats will have to assume this and more liabilities of Postmates.