Uber is seeking to buy third-party delivery provider Grubhub, according to Bloomberg.
According to the outlet, a deal could be reached this month. Grubhub's market value reached close to $6 billion Tuesday after the news. while Uber, which includes delivery service Uber Eats, had a market value that shot up to nearly $60 billion.
Data from analytics firm Edison Trends showed that in April, DoorDash commanded 47 percent of the food delivery market while Grubhub controlled 23 percent and Uber Eats represented 26 percent. Grubhub’s most prominent market is New York City, where it owns more than 60 percent of the sales, according to Second Measure.
Neither Uber or Grubhub confirmed the news Tuesday.
“We remain squarely focused on delivering shareholder value,” Grubhub said in a statement. “As we have consistently said, consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”
Meanwhile, Uber told outlets that it doesn't respond to "speculative M&A premiums" and that it's "constantly looking at ways to provide more values to our customers."
Grubhub proposed a deal that involves its shareholders receiving 2.15 Uber shares for each Grubhub share, according to the Wall Street Journal.
Uber lost $2.9 billion in the Q1 due primarily to the COVID-19 pandemic. It’s ride-share business has suffered, resulting in the company laying off 3,700 full-time employees, or about 15 percent of the workforce.
Meanwhile Uber Eats is booming. It generated $4.7 billion in bookings in Q1, up 54 percent year-over-year. In April, bookings grew 89 percent compared to the prior year, excluding India.
“There has been a tremendous increase in restaurant sign-ups leading up to rapid improvement in selection in major markets like the U.S. as well as behavioral shifts,” said Uber CEO Dara Khosrowshahi during the company’s Q1 earnings call. “ … We believe these trends are here to stay and will result in expansion of the entire category.
Third-party delivery providers have had a contentious relationship with restaurant operators amid the pandemic because of fees that sometimes reach 30 percent to 40 percent. Several cities have instituted emergency caps, such as San Francisco, Seattle, and Washington, D.C. Jersey City, New Jersey Mayor Steven Fulop signed an executive order last week to put the cap at 10 percent while dining rooms remain closed.
Grubhub in particular faced pushback when it announced in March that it was suspending collection of up to $100 million in commission payments from independent restaurants. However, it was later clarified that these payments would be deferred and that restaurants would have to pay them in the future.
“Grubhub is fear mongering liars,” Andrew Rigie, NYC Hospitality Alliance executive director, told QSR in April. “It goes back even before this when they were charging restaurants bogus fees for orders that never occurred and they tried to lie their way and misdirect their way out of that and they’re trying to do the same here. The company cannot be trusted. Restaurateurs tell me when they think about Grubhub and Seamless, they think about evil. That’s how they describe it.”
Grubhub CEO Matt Maloney said in the company’s earnings call that on average, independent restaurants are seeing a decrease of more than 10 percent in orders since San Francisco’s fee cap. He also added that orders have shifted to large brands or quick-serve restaurants that weren’t impacted by the rule.
“That's not good for small businesses, and even worse, these lost orders also result in lost wages and tips for our delivery drivers. We are open to reasonable measures during the pandemic that will help and not hurt restaurant revenue. Over time, we believe that reasonable governance will prevail, but because of the fluid and varying nature of the current situation, it's too soon to determine how it might specifically impact our business,” Maloney said.
Grubhub revealed in its earnings call that first-quarter revenue grew to $363 million, a 12 percent increase from last year.