Reports suggest that Uber is planning to strengthen its food delivery business through the acquisition of Postmates.
In the early hours of Monday (6 July), Bloomberg reported that Uber’s board of directors has approved plans to acquire competitor Postmates for $2.65bn. Neither party has publicly commented on the potential deal yet.
The reported acquisition comes after several years of discussions between Uber and Postmates, which were “accelerated” about a week ago, according to unnamed sources.
Prior to the reports, Uber had been vying to take over rival food delivery business Grubhub before it was acquired by Just Eat Takeaway for $7.3bn less than a month ago.
In Uber’s latest earnings report, its food delivery segment was one of the few areas of the business that experienced growth during the Covid-19 pandemic, growing 54pc year over year.
During the first fiscal quarter of 2020, Uber reported a loss of $2.9bn and laid off thousands of full-time employees as its transport business suffered.
Founded in 2011 by Bastian Lehmann, Sam Street and Sean Plaice, Postmates offers local, on-demand deliveries of fast food, pharmaceuticals, groceries and alcohol. In September 2019, Postmates was valued at $2.4bn after a $225m funding round.
Postmates is currently the fourth most popular app-based on-demand delivery service in the US, behind DoorDash, Uber Eats and Grubhub. The company planned to go public in February 2019 but delayed its initial public offering (IPO) due to “choppy” market conditions, as CEO Lehmann told TechCrunch.
To date, Postmates has raised more than $900m in funding, from investors including BlackRock, Founders Fund, Harmony Partners, Spark Capital and Tiger Global.
According to Bloomberg’s sources, if the acquisition goes ahead, Uber Eats head Pierre-Dimitri Gore-Coty is expected to run Uber’s combined delivery business while Lehmann and his team will manage Postmates as a separate service.
If all goes to plan for Uber and Postmates, the competition in the US food delivery market will become even more concentrated with Uber Eats and Postmates primarily competing against just two companies: DoorDash, which currently leads the market, and the newly merged Just Eat Takeaway and Grubhub.