Uber Reaches Out to Grubhub for Takeover, GRUB Stock Jumps 29%

UTC by Bhushan Akolkar · 3 min read
Uber Reaches Out to Grubhub for Takeover, GRUB Stock Jumps 29%
Photo: Grubhub / Facebook

As per the industry report, Uber and Grubhub are reportedly in talks of possible takeover deal as Uber looks to expand its footprint in the U.S. food delivery market. This acquisition can possibly help Uber to win 55% of the market share.

Ride-hailing giant Uber Technologies Inc (NYSE: UBER) is set to expand its footprint in the competitive food-delivery space. On Tuesday, May 12, Uber Technologies made an offer to acquire America’s food-delivery giant Grubhub Inc (NYSE: GRUB).

The two companies are currently working out an all-stock deal as the pricing negotiation remains at odds. Reportedly, Uber has also offered 2.15 Uber shares for one Grubhub share to the latter’s shareholders, said the people familiar with the matter. However, both sides have yet to agree on a deal that still remains confidential. The people also said that the two companies can reach an agreement by this month.

Uber and Grubhub: Acquisition Talks

Reportedly, Uber and Grubhub have been on acquisition talks on and off for an year. On Tuesday’s news, Grubhub share price also jumped a whopping 29% by closing. Also, on Tuesday’s close, Grubhub (GRUB) stock was trading at a price of $60.39 with a market of $5.55 billion.

On the other hand, Uber stock jumped 4% on Tuesday afternoon ending the day with 2.4% gains. On Tuesday close, Uber was trading at a price of $32.40 with a market cap of $56.18 billion.

Note that Uber is not the first company to reach-out to Grubhub for a takeover. Earlier this year, Grubhub was also reportedly discussing its acquisition by retail giant Walmart Inc (NYSE: WMT). However, later it had denied that it was up for sale. Uber didn’t confirm regarding any sort of this offer made to Grubhub. It said:

“We are constantly looking at ways to provide more value to our customers, across all of the businesses we operate. We have shown ourselves to be disciplined with capital and we do not respond to speculative M&A premiums.”

Consolidation in the Food Delivery Industry

The food delivery industry has been recently on the rise with the coronavirus lockdown across the U.S. While Uber’s ride-hailing business has suffered a major blow, its food delivery Uber Eats saw significant growth. Grubhub didn’t confirm anything about the deal but in a statement to Bloomberg, it said:

“We remain squarely focused on delivering shareholder value,. Consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”

Founded in 2004, Grubhub is one of the oldest food delivery companies in the U.S. However, the rising competition in this space from other market giants have squeezed Grubhub’s profit margins. So far, the food delivery business remains largely unprofitable.

Currently, DoorDash is the most popular food delivery company in the U.S. followed by Grubhub and Uber. However, this merger between Uber and Grubhub can help them capture 55% of the market share. some analysts that this would help in consolidating the U.S. Food delivery market while reducing cash burn.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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