Uber in talks to acquire Grubhub

San Francisco: Uber is in talks to acquire Grubhub, said three people with knowledge of the discussions, aiming to create one giant player in food delivery as more people turn toward those services in the coronavirus pandemic.

Uber recently approached Grubhub with a potential all-stock takeover bid, said two of the people, who spoke on the condition of anonymity because the details were confidential. In response, Grubhub asked for two Uber shares for each of its shares, two of the people said. That would value Grubhub’s stock at more than $60 a share, pegging a deal at around $6.1 billion, or roughly a 25% premium to Grubhub’s closing price on Monday.

The talks are still in process and could fall apart, the people said.

The discussions are a sign of how thoroughly the coronavirus has upended everything from the way that people are eating to how businesses must shift to find new growth. While food delivery has been offered for years, usage of the services has surged in the pandemic as consumers stay home and many restaurants across the country remain shut down.

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 instead 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% of the food delivery market in the United States, according to Wedbush Securities. DoorDash, which has filed to go public and has approximately 35% 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.”

After Bloomberg reported the talks between Grubhub and Uber, Grubhub’s shares soared 29%, while Uber’s rose more than 2%.