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May 13, 2020
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About this Deal

Why Uber wants to gobble up Grubhub
Deal makers have warned that merger prospects will suffer during the pandemic. But as Uber’s negotiations to buy Grubhub show, there’s still an appetite for some transactions, particularly if a business’s survival may be at stake.

Uber approached its food delivery rival after the pandemic hit, The Times’s Mike Isaac and Kate Conger report. Grubhub responded by asking for two Uber shares for each of its own, for a total valuation of $6.1 billion. (Standard deal caveat: Talks are ongoing and may fall apart.)
Overall deal activity has sunk this year. About $832 billion in transactions were announced through last Thursday, according to Refinitiv, down nearly 40 percent from a year ago. M.&A. relies on boardroom confidence, and the pandemic has crushed that.

• Deal news of late has mostly been about transactions breaking. The agreement to sell control of Victoria’s Secret fell apart last week — more on that below — and yesterday, the French insurer Covea walked away from a $9 billion acquisition of a rival, PartnerRe.

But this is a deal investors love. Grubhub’s shares soared 29 percent yesterday, while Uber’s rose over 2 percent. The delivery industry’s price wars — a byproduct of the billions that investors have poured into Uber and the like — would likely end if there were fewer players competing for customers.

• A combined Uber-Grubhub would control 55 percent of the U.S. meal delivery market, according to Wedbush Securities. And data from Second Measure shows that Uber-Grubhub would have nearly 80 percent market share in New York City, 70 percent in Boston and 60 percent in Chicago.
Some in Washington are worried about consolidation. Representative David Cicilline, the Rhode Island Democrat who leads the House’s antitrust panel (and called for a moratorium on most mergers during the pandemic) said yesterday: “We cannot allow these corporations to monopolize food delivery, especially amid a crisis that is rendering American families and local restaurants more dependent than ever on these very services.”

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