Uber Technologies is reportedly engaging in talks to acquire its subsidiary's online food delivery rival GrubHub Inc. According to reports citing sources with knowledge in the matter, Uber is looking to consolidate the operations of its Uber Eats business with Grubhub through an all-stock deal.
Acquiring GrubHub could give Uber Eats the leverage it needs to become more competitive against its main rival DoorDash in the rapidly expanding food delivery market. Amid the ongoing shelter-in-place orders and lockdowns in its different markets, Uber's ride-hailing business has experienced massive losses. The company is now banking on its online food delivery unit to at least pick up some of the slack.
Following news of the possible merger, GrubHub's share prices in the US surged by more than 13.6 percent and closed at $60.39 per share. Uber's share prices had also climbed by around 2.4 percent to $32.40 per share.
Both companies are reportedly still trying to negotiate the transaction's stock exchange ratio. The same sources have claimed that a deal is not yet certain as both sides have yet to reach an agreement. Uber will be pushing for the deal to go through and will possibly even give in to some of GrubHub's demands. The company's only move to adapt to the continued disruptions in its core business will be to double down on its rapidly growing service amid the crisis.
Both Uber and GrubHub have declined to comment on the reports, but a representative from the latter did say that consolidation would make sense. Industry experts have pointed out that consolidation is long overdue and would make good business sense given the rapid surge in demand due to the current circumstances.
The exact value of the deal is yet to be determined. Under the proposed transaction, Uber will have the highest negotiating position given its nearly $55 billion market capitalization as of Monday's close. Meanwhile, GrubHub only has a market capitalization of about $4.3 billion.
Analysts at Wedbush have noted that acquiring GrubHub would be an unprecedentedly aggressive move for Uber to both get rid of a major competitor and to expand its current market share. If the companies do merge, the US online food delivery market will essentially have two major players.
According to a report published by research and analytics firm Second Measure, DoorDash holds around 42 percent of the US' meal delivery market as of March 2020. Meanwhile, GrubHub holds the second largest market share with 28 percent, followed by Uber Eats with 20 percent.
