Uber has agreed to acquire food-delivery company Postmates, following rumors about a possible sale circulating over the weekend. The move leaves Uber with a large share of the food delivery market, uniting two of the largest food delivery companies — Uber Eats and Postmates — under one banner.
Uber failed in its plans to purchase fellow delivery company Grubhub earlier this year due to apparent regulatory concerns. Instead, it has agreed to purchase Postmates for $2.65 billion in an all-stock transaction, issuing approximately 84 million shares in return for 100% of the equity of Postmates.
“Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand,” Postmates co-founder and CEO Bastian Lehmann said in a statement. “Joining forces with Uber will continue that mission as we continue to build Postmates while creating an even stronger platform that brings this mission to life for our customers.”
The move comes at a crucial time for Uber, which reported $2.9 billion in losses in the first quarter of 2020, with rides dropping substantially in the wake of the coronavirus pandemic. The company laid off 3,700 employees recently and has branched into more delivery services to compensate for ride losses.
Uber Eats grew 54% year-over-year according to the same report, bolstered by a restaurant industry forced to shift to takeout while coronavirus lockdowns remain in place.
Although lockdown restrictions have eased across the United States, it’s unclear if restaurants will see a return to regular dine-in numbers any time soon. Many cities and states still require restaurants to limit the number of customers in the building and to space them out, and millions of Americans may remain uncomfortable dining out until the pandemic is fully under control, something that might not happen until next year.
The acquisition might give Uber an edge over its biggest rival, DoorDash, which controlled about 35% of the food delivery market in late 2019.
For consumers, the most notable effect could be a rise in fees. A 2016 paper studying the effects of mergers and acquisitions found “evidence that M&As increase markups on average across U.S. manufacturing industries, but … little evidence for channels often mentioned as potential sources of productivity and efficiency gains,” so those fees you see tacked on to your Postmates bill might jump.
The sale could also pose a problem for restaurants. With the decline in dine-in sales, restaurants without their own delivery infrastructure are forced to turn to services such as Uber Eats and Postmates, losing a chunk of their sales to the commission those services charge.
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