Uber Technologies Inc. is seeking to acquire Grubhub Inc. in a deal that would unite two of the biggest players in the cutthroat meal-delivery business at a time when the coronavirus pandemic has sparked a surge in demand for their services. Uber, which in addition to its flagship ride business operates a big meal-delivery unit known as Uber Eats, in February approached Grubhub with an all-stock takeover offer and the companies have been in talks since then, people familiar with the matter said. Grubhub recently proposed that Uber pay 2.15 of its shares for each Grubhub share, which Uber rebuffed as too high, and now the two sides are discussing a lower price, some of the people said.
At the same time, companies like Uber are trying to limit damage to their business from the coronavirus — its main ride-hailing business has cratered as people have stopped traveling — and double down on services that are growing. The food delivery business has also been highly competitive, with rivals regularly undercutting one another on delivery prices, so a deal that would unite two of the players could help reduce those pressures.
A combined Uber Eats, the ride service’s meal delivery unit, and Grubhub would have about 55 percent of the food delivery market in the United States, according to Wedbush Securities. DoorDash, which has filed to go public and has 35 percent of the market, the firm estimated, would be its largest U.S. rival.
“We’ve long believed that consolidation in online food delivery is inevitable, as too many companies with identical business models are depressing industry profitability via a cutthroat battle for market share expansion,” said Tom White, an analyst for D.A. Davidson.
But he added that if a deal happened, it would receive even closer regulatory scrutiny than usual, “given the impact any deal could have on a restaurant industry that is struggling to survive in the face of the pandemic.” David Cicilline, a Democrat from Rhode Island who leads the House antitrust committee, said in a statement, “We cannot allow these corporations to monopolize food delivery, especially amid a crisis that is rendering American families and local restaurants more dependent than ever on these very services.”
Todd Horwitz Chief Strategist BubbaTrading.com
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