Uber Technologies Inc is in advanced talks to buy online food delivery company GrubHub Inc, according to a person familiar with the matter.
A deal could make Uber more competitive with market leader DoorDash which in March had a 42 percent share in food delivery sales, data from analytics firm Second Measure showed.
Loss-making Uber Eats shared 20 percent of sales and Grubhub claimed 28 percent, making a merge of the two companies an attractive prospect for Uber after the coronavirus pandemic upended its core business of paying freelance drivers to shuttle people from place to place.
A merger of the Uber Eats restaurant delivery service with GrubHub shows how the Silicon Valley disruptor is scrambling to pivot in what promises to be a long period of business interruption by doubling down on its fastest growing business.
The value of the deal was not disclosed but an agreement could be reached as soon as this month, Bloomberg News reported.
Uber has made a takeover bid for meal delivery group Grubhub, reports said Tuesday, causing a rise in shares for both companies. The deal could see Uber compete with food delivery service leader DoorDash. Pictured is an Uber Eats truck in New York in 2019
An Uber spokesman said the company does not respond to 'speculative M&A premiums' but that the company is 'constantly looking at ways to provide more value to our customers, across all of the businesses we operate'.
GrubHub, in a statement, did not confirm the talks but said 'consolidation could make sense in our industry'.
'Like any responsible company, we are always looking at value-enhancing opportunities,' the statement added.
'That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.'
It will be an all-stock deal, Reuters reported.
Based on what happened in previous technology and economic downturns, such a merger would be unsurprising, said Jesse Reyes, chief executive of J-Curve Advisors, who advises venture capital and private equity funds.
'If you can't beat 'em, eat 'em. It's a natural evolution of how these disruptive technologies go,' Reyes said.
Shares of GrubHub closed at $60.39 Tuesday, a jump of more than 29 percent while Uber's closed up 2.3 percent at $32.40.
The approach comes as revenue from Uber Eats surged more than 50 percent to $819 million on a yearly basis in the recently reported first quarter as restrictions imposed to curb the coronavirus forced eateries to shut their dining areas. GrubHub had a market capitalization of about $4.3 billion, while Uber was valued at nearly $55 billion as of Monday's close, according to Refinitiv data.
But it reported a $313 million adjusted loss for the division.
UberEats, which offers food delivery services in more than 6,000 cities worldwide, has been a drag on the company's bottom line since its inception in 2014 due to heavy spending on customer promotions and driver incentives.
Uber in January sold its Indian food business to local rival Zomato and earlier this month closed Eats operations in eight countries.
Shares of GrubHub closed at $60.39 Tuesday, a jump of more than 29 percent
Shares of Uber closed up 2.3 percent Tuesday after news of the potential deal emerged
Grubhub's first-quarter revenue rose 12 percent to $363 million, but it also reported a net loss of $33.4 million.
Last week, GrubHub said the restaurant industry is facing enormous challenges from the COVID-19 pandemic, and the company is using nearly all of its profits in the second quarter to generate as many additional orders for its restaurant partners as possible.
Uber 'can wait and bit and probably get them cheaper. But it could be that you have a lot cats circling the same bowl,' Reyes said.
'It (the deal) will definitely be scrutinized but I think it will pass. GrubHub and Uber will likely push back saying industry isn't profitable and need to consolidate to make it work,' said Robert Mollins, an analyst with Gordon Haskett.
According to Bloomberg, the food delivery service still remains widely unprofitable even as demand continues at a significantly heightened level.
A young deliveryman delivering food in Times Square for Grubhub in May 2020. Grubhub shared 28% of food delivery sales in March, 8 percent more than Uber Eats. The ride hailing company is now reported to be in talks to buy Grubhub, it was revealed Tuesday
Meal delivery services saw year-over-year growth of 24 percent, through the end of March, according to Second Measure.
Tom Forte, an analyst with Davidson, said the pandemic will likely expand the size of the food delivery market, perhaps permanently.
That makes Grubhub particularly attractive to Uber now, Forte said, but it also makes it more likely that Grubhub will hold out for a better price or remain independent.
Forte said a combination of the two companies would likely receive close scrutiny from regulators, especially since the restaurant industry is struggling during the pandemic.
U.S. restaurant sales were down 43 percent the week of April 12, but have picked up slightly since then, according to NPD Group.
Uber lost 2.9 billion dollars in the first quarter as its overseas investments were hammered by the coronavirus pandemic.
Last week, the company announced it was offloading Jump, its bike and scooter business, to Lime, a company in which it is investing $85million.
Jump had been losing about $60million a quarter.
DailyMail.com revealed last week that 3,500 Uber employees who worked in customer service and recruitment around the US learned it would be their last day working for the firm on a live call.
A company filing on Wednesday revealed around 3,700 roles will be cut from its global workforce - roughly 14 percent of its 26,900 employees.
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