Uber Expands Food Delivery Business, Discusses M&A with Postmates

by Kwon Jaehee

Published 30 Jun.2020 14:39(KST)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Uber is in talks to merge and acquire (M&A) Postmates to expand its food delivery market. Instead of its ride-sharing service, which was hit hard by the COVID-19 pandemic, Uber plans to aggressively target the food delivery business as a new growth engine.

According to local media including The Wall Street Journal (WSJ) on the 29th (local time), Uber is reportedly negotiating to acquire Postmates for $2.6 billion (approximately 3 trillion KRW). The New York Times (NYT), citing sources, reported that an announcement could be made as early as next week.

Postmates, headquartered in San Francisco, California, was founded in 2011 by three co-founders: Sam Street, Sean Plaice, and Bastian Lehmann. Its valuation rapidly grew from $600 million in 2016 to $2.4 billion as of 2019. The service is known to be favored by celebrities such as model Kylie Jenner and singer John Legend, which attracted continuous investment.

Previously, Uber had been in M&A talks with Grubhub, but the deal fell through due to concerns about regulatory approval uncertainties and future prospects. Subsequently, Grubhub was acquired by the European food delivery company Just Eat Takeaway.

Following the failure of the M&A with Grubhub, analysts interpret Uber’s swift search for the next M&A target as a move to secure a leading position in the rapidly growing food delivery market. According to Swiss financial group UBS, the global food delivery market is expected to grow more than tenfold from $35 billion (40.7 trillion KRW) in 2018 to $360 billion (419 trillion KRW) by around 2030.

In particular, the food delivery industry hinges on securing many franchise stores and has a 'winner-takes-all' characteristic where only one company survives per region.