UBER TECHNOLOGIES, I

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Uber in Talks to Buy Postmates for Around $2.6 Billion -- Update

06/30/2020 | 12:06 am

By Cara Lombardo

Uber Technologies Inc. is in discussions to buy Postmates Inc. for about $2.6 billion, according to people familiar with the matter, the latest in a rapid-fire series of moves to consolidate the food-delivery industry.

Should a deal come together, it could be announced next week if not sooner, one of the people said. But there is no guarantee it will.

Postmates, which has held discussions with other possible buyers since at least last year, has been simultaneously planning an initial public offering. Just Monday, people familiar with the matter said the closely held meal-delivery startup was preparing in the coming days to make its IPO filing public, which could presage a trading debut later this summer.

A combination would augment Uber's food-delivery arm, Uber Eats, which already has an international footprint and the second-largest market share in the U.S. after DoorDash Inc., according to research from Edison Trends.

Postmates, founded in 2011 and based in San Francisco, is the smallest among the major U.S. players. The company has raised roughly $906 million and was valued at around $2.4 billion in 2019, according to PitchBook. It had confidentially filed for an IPO in February of last year, but the plan was delayed when the IPO market became less hospitable to unprofitable startups such as Postmates in the wake of WeWork's aborted IPO.

The New York Times earlier reported on the discussions between Uber and Postmates.

There has been a beehive of deal activity lately among food-delivery companies, which are seeking to better position themselves amid cutthroat competition and as the coronavirus pandemic boosts demand. By combining forces and cutting costs, the companies could jump-start their path to profitability, something investors are increasingly eager to see.

Grubhub Inc. agreed this month to be bought by Just Eat Takeaway.com NV for more than $7 billion, besting a bid from Uber, which had been in talks to combine with Grubhub for months. DoorDash just raised $400 million in a funding round that valued it around $16 billion and comes as the privately held company lays the groundwork for its own IPO.

Even with millions of Americans stuck at home and ordering more meals in, food-delivery companies are losing money on orders or barely breaking even. Increased costs to fund promotions and safety equipment on one hand, and pressure to reduce commissions for strapped restaurants on the other, have created an even more challenging financial proposition for the companies.

Uber Chief Executive Dara Khosrowshahi has previously said the company would exit food-delivery markets in which it wasn't a dominant player. But the meal business has taken on new weight and significance as the company's core ride-hailing operation suffers amid pandemic-triggered lockdowns.

Write to Cara Lombardo at cara.lombardo@wsj.com

 

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