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Offer To Acquire Grubhub Proposed By Uber, Says Reports

Offer To Acquire Grubhub Proposed By Uber, Says Reports
The stay at home orders as well as the anticipated restrictions that are to be imposed against crowding in restaurants and eateries in the United States and other places has increased business opportunities for food delivery companies. Keeping a focus on this aspect of the future of food delivery industry, Uber Technologies Inc. has been reported to have made a move for acquisition of Grubhub Inc., according to reports. If the deal goes through, it will create that largest food-delivery company in the US.
Reports citing information from sources with knowledge of the matter said that both the companies are currently in negotiations for the deal and an agreement could be reached between them by the end of the current month. The report however said that there is so far no certainty of the deal as the negotiations could fall through at any point.
“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,” Grubhub said in a statement.
Uber said it wouldn’t “respond to speculative M&A premiums” and that the company is “constantly looking at ways to provide more value to our customers, across all of the businesses we operate.”
The news of the acquisition pushed shares of Grubhub by as much as 39 per cent at the New York stock exchange. The market value of the company according to the share price strands at $5.6 billion. Uber currently has a market value of $56 billion.
Founded in 2004, Grubhub is the oldest of the major app based food delivery companies in the US. The company’s profits have come under pressure because of competition from DoorDash Inc. and Uber in recent years. The novel coronavirus pandemic has piled on that pressure forcing the company to withdraw 2020 financial guidance issued by it last month.
The pandemic and the related business pressure has also forced Uber to back track on its earlier guidance for the year and said that its announced plan of turning out a quarterly adjusted profit by this year will only be possible sometime in 20201.
Food-delivery operations in seven countries are being closed down by Uber as a part of its plans to cut down on costs. The company said last week that these were businesses that had failed to take off. The company added that the markets from where it is exiting accounted for just 1 per cent of the gross bookings of Uber Eats gross bookings but contributed to about 4 per cent of the business’s adjusted loss before interest, taxes and other expenses during the first quarter of 2020.
The global spread of the novel coronavirus pandemic and the subsequent restrictions imposed on travelling and lockdown imposed by governments all across the world to prevent the spread of the pandemic has hit the ride hailing business of Uber very hard. But that hit has been somewhat cushioned by the growth in its delivery business in the US and other developed markets because of people ordering food online as they are forced to stay at home.

Christopher J. Mitchell

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