Uber has agreed to acquire the food delivery start-up Postmates for $2.65 billion as it aims to expand its presence in on-demand food delivery while its core ride-hailing business struggles. The companies announced the all-stock deal on Monday morning. Uber will combine Postmates with its own food delivery subsidiary, Uber Eats, which has been growing during the coronavirus pandemic. Postmates will continue to operate under its own name.

Food delivery apps, which connect drivers, restaurants, and customers, have grown quickly in recent years, fueled by venture capital and armies of contract workers. But the apps offer very similar services, leading to heavy competition and pressure to keep fees low. While more people have been using delivery services during the pandemic, profits have been elusive. As a result, delivery app companies have circled one another, aiming to make deals to gain scale. Postmates previously discussed possible deals with DoorDash, the largest service in the United States, and another rival, Grubhub, according to two people with knowledge of the talks.

Uber said Monday that bookings for its Eats division in its second quarter more than doubled from the previous year. Postmates said its gross orders grew 50% in its second quarter from the previous one, with the majority of those transactions coming from restaurants. Online grocery delivery has also boomed during the pandemic, with online service Instacart Inc. reporting a surge in orders from supermarkets. A number of restaurant delivery players have tried to get a cut of the grocery market. DoorDash does grocery delivery for Walmart Inc., and Uber took a majority stake in grocery-delivery company Cornershop.

Mr. Khosrowshahi said he expects competition to last in restaurant delivery in the U.S. for years, fueling the company’s interest to get into other to-go services even if that means bumping up against Amazon.com Inc. and Walmart. “The category and markets are going to start overlapping with a lot of other players,” he said.

The deal will translate into continuing discounts as rivals try to compete for customers and restaurants, said Robert Mollins, of market-research firm Gordon Haskett. “The promotional environment won’t be slowing down anytime soon,” Mr. Mollins wrote in a note. Uber Eats has a larger international footprint than its other U.S.-based food-delivery rivals. The ride-share company said Monday that Eats has a top position in dozens of global cities, including London, Paris, and Mexico City.

Todd Horwitz Chief Strategist BubbaTrading.com
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