Uber in talks to acquire Grubhub

Uber has reportedly approached Grubhub with a takeover offer.

Greg Roumeliotis, Akanksha Rana, and Lisa Baertlein reported the news for Reuters:

Uber Technologies Inc is in negotiations to buy online food delivery company Grubhub Inc in an all-stock deal, according to people familiar with the matter.

A merger could give Uber Eats’ money-losing restaurant delivery service a leg up on market leader DoorDash at a time when the coronavirus pandemic has upended Uber’s core business of shuttling people from place to place.

Uber and Grubhub are still haggling over the deal’s stock exchange ratio, and there is no certainty that they will reach an agreement, the sources said.

Andria Cheng from Forbes noted:

With the coronavirus pandemic keeping consumers at home and ordering more food for delivery, ride-sharing company and Uber Eats parent Uber has reportedly made an offer for smaller rival Grubhub in a potential tie-up that would make Uber the largest U.S. food delivery platform.

Grubhub shares surged 29% on Tuesday while Uber’s rose 2.4% after Bloomberg reported the two companies were in talks and could reach a deal as soon as this month.

For Uber, which has partnerships with major chains from McDonald’s to Starbucks, a purchase of Grubhub would give it sizable reach with small and independent restaurants, which Cowen & Co. analyst Andrew Charles estimated represent over 80% of Grubhub’s orders. The combination could also give both businesses more scale and room to cut costs. Both apps posted losses in their most recent quarters, even with increased order demand.

CNBC’s Lauren Hirsch and Steve Kovach wrote:

The two companies have had discussions about an all-stock deal that would offer Grubhub shareholders 2.15 Uber shares for each Grubhub share, one of the people said. The people requested anonymity because the information is confidential. 

However, both sides have yet to agree on a deal, and CNBC’s David Faber reported Tuesday that Uber has rejected the proposal to buy Grubhub for 2.15 Uber shares per share of Grubhub. The two sides have been in acquisition talks off and on for about a year, Faber reported. The two sides remain at odds on price.

Grubhub had a market cap of about $5.8 billion Tuesday afternoon, after news of a potential deal sent Grubhub’s stock skyrocketing up as much as 38%, before ending the day up 29%.