On Monday, Uber Technologies Inc. said it would acquire Postmates Inc. for $2.65 billion to expand its food delivery market share. This will help Uber massively increase the business of supplying everyday goods at a time when the coronavirus has wreaked havoc on its core ride-hailing service.
This deal signifies how Uber is adapting its business model to deal with the negative effects that the coronavirus has had on its core ride-hailing service. Demand for rides, which is Uber’s biggest business, dropped 75% in the second quarter from a year ago, CEO Dara Khosrowshahi told Wall Street analysts in a conference call on Monday discussing the deal. In contrast, demand for Uber Eats food delivery service doubled during the same three-month period.
The all-stock deal, still subject to regulatory approval, would give Uber approximately 37 percent share of the US food delivery market (this includes its food delivery service, Uber Eats). This will make it the second-largest food delivery service in the US. The biggest food-delivery app is DoorDash, which has 45% of the U.S. market.
The ride-hailing giant said both companies’ boards have approved the deal, for which Uber currently expects to issue around 84 million shares of common stock. It offered a premium of about 10 percent on Postmates’ last valuation of $2.4bn.
Uber CEO, Dara Khosrowshahi, told analysts on Monday that this deal would allow Uber Eats to distinguish itself by delivering not only restaurant food, but everything from groceries to personal care and fashion items. “The vision for us is to become an everyday service,” the Uber CEO said.