Uber Reportedly Agrees to Acquire Postmates for $2.65 billion

Like other travel and transportation related businesses, Uber’s ride-hailing segment has been negatively impacted by the ongoing pandemic, due to shelter-in-place orders throughout the United States. On-demand delivery, however, has grown, with people relying on services like Uber Eats to get food without leaving their homes. According to its last earnings report, Uber’s ride-hailing gross bookings dropped, but its food delivery service saw gross sales growth of 54% during its first fiscal quarter.

According to previous reports, Uber made an offer to buy Grubhub, another on-demand delivery service, earlier this year, but after that deal fell through, it approached Postmates. Reports state that Uber and Postmates have actually talked on and off for about four years, but negotiations became more intense about a week ago. Postmates is an American company that offers local delivery of restaurant prepared meals and other goods. As of February 2019, Postmates operates in 2,940 U.S. cities.

The service relies on mobile phone applications and their Global Positioning System capabilities to match inventories and consumer demand. Launched in 2011, Postmates is one of many on-demand delivery companies in the United States providing delivery from restaurants and stores that previously did not offer goods delivery. Postmates is an example of an on-demand company. Postmates co-founder Bastian Lehmann calls the company “anti-Amazon”.

Grubhub ended up being acquired by Just Eat Takeway in a deal worth $7.3 billion after its negotiations with Uber stalled.
With its last venture valuation of $2.4 billion in September 2019, Postmates is a smaller company than Grubhub. The company confidentially filed to go public in February 2019, but decided to hold off because of “choppy market” conditions. There was one report as late as last week claiming that Postmates would be putting in a public IPO filing this week with a target valuation of $3.9 billion, possibly a story seeded in an attempt to raise the valuation in the midst of negotiations.

If the deal goes through, the main competitors in the American food delivery market would be Uber Eats/Postmates versus Grubhub/Takeaway versus DoorDash.

In other countries, companies like Grab have also begun building out their on-demand delivery services to make up for losses from fewer ride-hailing bookings. For example, Grab responded to stay-at-home orders in Indonesia (its main market) and other Southeast Asian countries by re-deploying ride-hailing drivers to on-demand deliveries for food and essential items.

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