Uber has found itself in the acquisition market once again after a botched deal with GrubHub a month ago. The company announced Monday it has agreed to acquire startup Postmates, a development that, like in the past, has prompted anti-monopoly concerns.
The two companies, Uber Technologies, Inc. (NYSE: UBER) and Postmates Inc. announced that they have reached a definitive agreement under which Uber will acquire Postmates for approximately $2.65 billion in an all-stock transaction.
This transaction brings together Uber’s global Rides and Eats platform with Postmates’ distinctive delivery business in the U.S. Postmates is highly complementary to Uber Eats, with differentiated geographic focus areas and customer demographics, and Postmates’ strong relationships with small- and medium-sized restaurants, particularly local favorites that draw customers to the Postmates brand. Additionally, Postmates has been an early pioneer of “delivery-as-a-service,” which complements Uber’s growing efforts in the delivery of groceries, essentials, and other goods.
“For restaurants and merchants, Postmates and Uber Eats will together offer more tools and technology to more easily and cost-effectively connect with a bigger consumer base,” statement from Uber said. “Consumers will benefit from expanded choice across a wider range of restaurants and other merchants. And delivery people will enjoy more opportunities to earn income, with increased batching of orders to make better use of their time.”
Following the closing of the transaction, Uber intends to keep the consumer-facing Postmates app running separately, supported by a more efficient, combined merchant and delivery network.
“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery—they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19.
“As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100 percent year on year. We’re thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country,” said Uber CEO Dara Khosrowshahi.
Postmates Co-Founder and CEO Bastian Lehmann said the acquisition will help fulfill their on-demand mission to their customers.
“Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand. 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.
“Uber and Postmates have been strong allies working together to advocate and create the best practices across our industry, especially for our couriers. Together we can ensure that as our industry continues to grow, it will do so for the benefit of everyone in the communities we serve,” he said
Uber currently estimates that it will issue approximately 84 million shares of common stock for 100% of the fully diluted equity of Postmates.
The boards of directors of both companies have approved the transaction, and stockholders representing a majority of Postmates’ outstanding shares have committed to support the transaction.
The transaction is subject to the approval of Postmates stockholders, regulatory approval and other customary closing conditions and is expected to close in Q1 2021. Wachtell, Lipton, Rosen & Katz served as legal counsel to Uber. J.P. Morgan Securities LLC served as financial advisor and Latham & Watkins LLP as legal counsel to Postmates.
However, the concern of monopoly that quashed Uber’s deal with GrubHub has resurfaced. The Uber-Postmates joint venture, if approved, would control a 37% share of food delivery sales in the US, placing behind first place DoorDash at 45% and ahead of GrubHub at 17% share.
That playing field drew concern from the Open Markets Institute, which said ‘an oligopoly’ of UberEats/Postmates, GrubHub, and DoorDash would control 99% of the food delivery app market. The Institute said the companies have engaged in predatory behavior.
The Institute said the prospective merger raises Clayton Act concerns, referring to the legislation that bars acquisitions that stand to “substantially lessen completion, or to tend to create a monopoly.”
Uber has been trying to augment its ride-hailing business that has been on hold following the outbreak of COVID-19 that has stifled movement around the world. Alas, its efforts to use the eatery side of its investment to make up for the loss has repeatedly been met with stiff opposition as it is perceived as bullying for monopoly.
“These destructive delivery apps were not built to help restaurants, provide secure jobs, or even properly deliver food – they were built to monopolize an essential service and reap profits for investors,” said Claire Kelloway, food researcher at Open Markets.