As the pandemic has shifted Uber's business thinking in the direction of more food delivery, the company has reportedly made an offer to acquire GrubHub, the app-based meal delivery rival of Uber Eats and parent company of the Seamless, MenuPages, and Eat24 brands.
The Wall Street Journal broke the story Tuesday, and according to "people familiar with the matter," Uber approached GrubHub earlier this year and "the companies continue to discuss a possible combination." Bloomberg characterizes the deal as a takeover offer, and says it's expected to be sorted out sometime this month.
Chicago-based GrubHub is valued at around $4.5 billion, and under the deal, GrubHub shareholders would receive 2.15 Uber shares for every GrubHub share. Uber's board members are said to be reviewing terms this week, per the Journal, and GrubHub's stock price jumped Tuesday morning on the news from $47 a share to nearly $64, or 36 percent. Uber stock was also up around 7.5 percent to $34 a share.
Uber is currently worth around $55 billion, per Bloomberg.
Uber just announced last week that it was laying off 3,700 employees, primarily in customer support and recruiting, and last year there were also some layoffs in Eats. But that was before the lockdowns that have suddenly made delivery businesses some of the most thriving operations in the world. And Uber is betting that won't change anytime soon.
CNN quotes CEO Dara Khosrowshahi as saying in an investor call last week, "There is a silver lining to this unbelievably tragic COVID virus, which is the business that we have of Eats and the category in general, just looks like it is going to be substantially increased and some would say by multiples."
If Uber Eats and GrubHub joined forces, it would be the culmination of some long-discussed consolidation in the delivery app world, where just a few years ago there was also competition from Bay Area-based Munchery and Sprig, to name a couple more. Last August, SF-based DoorDash acquired rival Caviar, which turned out to be a boon for DoorDash as Caviar has become the go-to partner for many higher-end restaurants in the Bay Area and elsewhere that have newly entered the takeout and delivery sphere.
But GrubHub, Postmates, and DoorDash have all faced criticism in recent months as they've been profiting off of the struggling restaurant industry at a time when restaurants have laid off scores of workers and are in a desperate fight to survive. San Francisco placed a 15-percent cap on delivery app commissions last month in response to complaints from restaurant owners, New York has capped fees at 10 percent, and Chicago, where GrubHub is based, is mulling a 5-percent cap.
While restaurants have seen the apps as a necessary evil in tough times, some are still trying to get the word out that if more customers pick up the phone and place takeout orders directly, and leave their homes to fetch them, the restaurants get to keep more of the meal price.
Also in recent months, GrubHub had some bad PR over a shady practice involving the creation of misleading online menus for restaurants that had not signed up with their service, as well as for the promotion of ghost kitchens that compete with brick-and-mortar restaurants for business without having the same overhead. In one notable case in January, a ghost kitchen with a similar name had some wires crossed on GrubHub and Seamless with the Michelin-starred Thai restaurant Kin Khao, leading to outrage from the restaurant's owner.
As CNN notes, all the competitors in the delivery space currently have plenty of venture capital with which to compete — and this is likely why Uber wants to buy up a competitor at this point in time.