In its fight to survive the harsh economic realities of COVID-19, Uber is thrusting deeply into foods. In its latest move, the ride-hailing company is making an offer for Grubhub Inc., according to Bloomberg.
Grubhub Inc. is an American online and mobile prepared food ordering and delivery marketplace that connects eaters with local takeout restaurants. Founded in 2004, the company has grown a customer base of over 19 million users and 115,000 associated restaurants across the 50 US states and the UK from its base in Chicago.
The companies are said to be in talks as the effects of coronavirus have dampened their businesses, leaving them totally exposed to the uncertainties of the harsh economic climate.
Grubhub has held its ground amidst competition from DoorDash and Uber, using its 16 years’ experience to stay in the food game. The company’s shares surged to 39 percent in New York trading after it was temporarily halted. Grubhub market value stood at $5.6 billion after closing New York trading at 29 percent. Uber has a market value of $56 billion and added 2.3% increase at the end of trading on Tuesday.
The COVID-19 pandemic has hit Uber food services in many countries, pushing the company to shut many of its outlets internationally in a bid to cushion the effects of the downturn.
Apart from the Middle East where its subsidiary, Careem is planning to lay off 536 of its workforce, Uber will shutter its food operation in Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine on June 4. The austerity plan includes transferring Saudi Arabia’s operation to Careem on June 4.
Uber purchased Careem last year for $3.1 billion, but many of its operations in the Middle East have been badly hit by the coronavirus outbreak. The Dubai-based Careem suspended a portion of its public transit offering citing coronavirus.
Uber appears to be desperately looking for a way out of the loop as its ride-hailing business has been on the standstill in most countries around the world due to precautionary lockdowns initiated by governments to stem the spread of the pandemic.
The San-Francisco based company is counting on food delivery to stay in business until the dust of the pandemic settles.
Uber and Grubhub are looking to conclude the deal at the end of the month. But the matter remains confidential as negotiations are still going on between the two. A statement issued by Grubhub failed to acknowledge or deny the deal while Uber refused to comment on the matter.
“Consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment,” the statement from Grubhub said.
However, the challenge lies on the overall food delivery performance which has dwindled considerably. But many believe that a merger between Uber and Grubhub will consolidate the US food delivery market. SoftBank’s owned DoorDash has been leading the market space with Grubhub in second place; Uber is left in third place. But a merger could see Uber and Gruhub controlling 55 percent of the food delivery service in the US.
Grubhub’s stock rose 63 percent at the news of its merger with Uber. But concern remains that the deal will spring antitrust inquiries from the authorities.
Uber’s CEO, Dara Khosrowshahi has been strategizing to keep the company afloat with new ideas. Last month, Uber launched two initiatives called ‘Uber Direct’ and ‘Uber Connect.’ Uber Direct lets users order items from select retailers and have them delivered directly to their door, while Uber Connect allows users in 25 cities in Australia, Mexico send packages to relatives and friends.
The aim was to keep many of its drivers on the roads as essential workers, as they distribute food items, drugs, pet supplies and foods. It also offers delivery of items for family members who have been separated by movement restrictions. But as the restrictions ease in many cities following a drop in numbers of coronavirus cases, the idea is becoming less practical, forcing Uber to concentrate on food delivery.