Uber to acquire Postmates for $2.65bn

September 2020 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

September 2020 Issue

Less than a month after a failed attempt to acquire Grubhub, Uber Technologies has agreed to purchase Postmates Inc for $2.65bn in an all-stock move which will expand its food delivery market share.

The boards of directors of both companies have approved the transaction, and stockholders representing a majority of Postmates’ outstanding shares have committed to support the transaction. The deal is subject to the approval of those stockholders, regulatory approval and other customary closing conditions, and is expected to close in Q1 2021. Uber has committed to providing bridge financing to Postmates as it awaits deal approval.

Uber estimates that it will issue approximately 84 million shares of common stock for 100 percent of the fully diluted equity of Postmates.

A merged Uber-Postmates would control about 37 percent of the food delivery market in the US. DoorDash has around a 45 percent share, based on data from Edison Trends. Postmates’ presence has declined in the face of strong competition from deeper-pocketed competitors. In June, the company had a market share of about 8 percent.

Uber described the Postmates business as “highly complementary” to Uber Eats, citing the two companies’ differing geographic focus and target demographics. It also noted 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. Uber has launched an option to send packages via its US ride-hail drivers during the COVID-19 pandemic and teamed up with grocery stores in several countries. The acquisition of Postmates allows the company to expand these services into Postmates’ existing network in 4200 US cities.

Consolidation in the food delivery space has increased since the outbreak of COVID-19, which has raised market demand. At the same time, for Uber and other ride-hailing businesses, the need to diversify their operations has become pressing. Uber suffered an 80 percent drop in ride volume in April, and in May posted a $2.9bn loss for the first three months of the year, adding that it was laying off 14 percent of its workforce. However, bookings for its Eats business were up 52 percent year over year in the first quarter, though the unit recorded a $313m adjusted EBITDA loss during this period.

“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,” said Dara Khosrowshahi, chief executive of Uber, in a statement. “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.”

“Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand,” said Bastian Lehmann, co-founder and chief executive of Postmates. “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.”

Uber’s attempt to acquire Grubhub fell apart amid reported antitrust scrutiny, and Grubhub was acquired by European-based Just Eat Takeaway for $7.3bn.

Richard Summerfield