Uber Eats’ acquisition of Postmate is good for Uber
July 08, 2020
On Monday, 6th July, Uber says it has plans on acquiring Postmates for US$2.65 Billion. Given the low demand for its ride-sharing services, the move appears to be good for Uber
Uber CEO Dara Khosrowshahi said on Tuesday 7th July that it is “very confident we’re going to get to profitability next year and we have enough of a diversified portfolio to make that statement with quite a bit of confidence.”
Share price of Uber rise
The announcement caused Uber’s stock to rise by 7% since the announcement was made, according to Forbes. The plans to acquire Postmates is likely to be closed in the first quarter of 2021. The deal will thus see a merger between Uber Eats and Postmate (an on-demand delivery and pickup platform. It connects customers with local couriers who can deliver nearly anything from food from your favorite restaurant to outfits from your retail store).
A stronger position for Uber Eats
This deal will substantially help with Uber Eats unit economics since the acquisition will shore up the services and position of Uber Eats in the US food delivery market which is currently dominated by DoorDash; a U.S. food delivery service which holds 45% of U.S food delivery sales.
It is worthy to note that before the plan to acquire Postmate, Uber was set to acquire Grubhub but failed as Grubhub accepted a bid from European food delivery company Just Eat Takeaway in an all-stock acquisition deal valued at $7.3 billion. Uber pulled back from the deal due to scrutiny from anti-trust authorities.
Insight
As the global pandemic took a toll on the world’s economies, Uber posted a $2.9 billion loss for the first quarter of 2020 and job cuts of 3,700. However, revenue for its Uber Eats division rose by 53%. Uber CEO Dara Khosrowshahi said in a press release “As more people and more restaurants have come to use our services, second-quarter bookings on Uber Eats are up more than 100 percent year on year.”
Given the numbers, Uber Eats seems to be the positive revenue stream that the company needs. And with Postmate reporting 50% quarter on quarter bookings growth at the end of June why wouldn’t there be an acquisition.
