Uber to buy delivery service Postmates for $2.65 billion in stock

Uber Technologies, Inc. has agreed to buy delivery service Postmates Inc. in a US$2.65 billion all-stock deal, the companies announced in a statement on Monday.

The deal is expected to close in the first quarter of 2021, subject to the approval of Postmates stockholders and other regulatory approvals.

The deal will allow Uber to expand its meal delivery business, UberEats, which as of now only delivers meals directly from restaurants. Postmates, on the other hand, delivers a wide variety of goods such as groceries, party supplies, alcohol and pharmacy products.

Uber’s chief executive officer Dara Khosrowshahi said in the statement, “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."

Because of the current COVID-19 pandemic, the acquisition is especially beneficial for Uber which in April saw its ride-hailing business drop by 80% compared to the same period last year. Uber’s delivery services, on the other hand, have increased by 54% in the first quarter as more people have been at home.

The companies stated that under the deal the Postmates app will run separately, “supported by a more efficient, combined merchant and delivery network.”

“The vision for us is to become an everyday service,” Khosrowshahi told Uber executives in a conference call on Monday. “Postmates is a great step along that vision. Anyplace you want to go, anything you want delivered to your home, Uber is going to be there with you, and we think these everyday frequent interactions create a habit, create a connection with customers.”

Considered to be a pioneer in the on-demand delivery service industry, Postmates has been successful in urban areas such as Los Angeles, Miami and Las Vegas, with 10 million active customers.

However, compared to other delivery services, it remains a small company, with an 8% market share in delivery sales for the month of May, according to analytics firm Second Measure.

Meanwhile, Uber, with a 22% market share in May, remains second only to DoorDash which, with a 45% market share in the same month, leads sales in the United States.

Khosrowshahi said in the conference call to Uber executives that Postmates has been able to make efficient use of technology to group together orders

“We’ve always admired Postmates, I guess, begrudgingly from afar in that it was a competitor who was able to compete aggressively and to be a leader in some very important markets with a much smaller capital base than a lot of its competition, including ourselves."

Following the announcement on Monday, shares of Uber increased by 5% in early trading.

Both Uber and Postmates would have a 37% combined market share of food delivery sales in the US, still behind DoorDash, according to Edison Trends, which provides e-commerce data and industry insights.
Last month, Uber lost a deal to buy meal-delivery service Grubhub amid antitrust concerns, as an acquisition would have meant that Uber would control approximately 55% of the US meal delivery market share. Grubhub was instead acquired by Dutch company Just Eat Takeaway.

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