Just a few weeks after it lost out on a high-profile deal to acquire food delivery company Grubhub, Uber hasn’t given up on bolstering its own meal delivery service with an acquisition.
Uber (UBER) is now reportedly in talks to buy Postmates, a nine-year-old delivery startup, for about $2.6 billion, according to the The New York Times and the Wall Street Journal, citing sources familiar with the matter. A deal could be announced in a matter of days, or could fall through, the outlets reported.
Uber and Postmates declined to comment.
Uber’s attempts to pursue big, pricey acquisitions in the food delivery market highlight a fundamental shift for the company. Uber, which started as a ride-hailing service, has long dabbled in other categories, including meal deliveries with its Uber Eats service. But those efforts have arguably taken on new urgency as the pandemic has simultaneously cut demand for its core rides business while leading to skyrocketing demand for meal deliveries.
Uber Eats has been viewed as a bright spot for the company, especially as people increasingly stay at home.
“At a time when our Rides business is down significantly due to shelter-in-place, our Eats business is surging,” Uber CEO Dara Khosrowshahi said on the company’s first quarter earnings call in early May. Khosrowshahi said the company’s rides business was down about 80% in the month of April.
There’s just one problem for Uber as it looks to bet more on food delivery: the market is incredibly crowded. That could make it harder – and more costly – for Uber to gain market share.
This month, Uber lost in its bid to buy Grubhub to a Netherlands-based company, Just Eat Takeaway.com, whose offer valued Grubhub at $7.3 billion. DoorDash announced it raised $400 million in new financing, valuing the company at nearly $16 billion. Meanwhile, grocery delivery startup Instacart raised $225 million, bringing its valuation to nearly $14 billion.
Postmates is considered a pioneer in the on-demand delivery industry, but it is one of the smaller competitors in the US market. In May, the startup earned 8% of meal delivery sales in the US, according to analytics firm Second Measure. DoorDash, which acquired premium restaurant delivery service Caviar last August, is the US leader in terms of sales, with a 44% share.
Postmates is keeping its options open, including potentially moving forward with an IPO, which could see the company make its Wall Street debut before the end of the summer, according to the Wall Street Journal.
The San Francisco-based startup filed initial paperwork to go public in February 2019. The company has raised more than $900 million, and was valued at $2.4 billion in September 2019.