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Uber Eats Is Reportedly Trying to Buy Postmates

Spurned by Grubhub, the struggling ride hail company has moved on to its second choice

Uber is reportedly in talks to purchase Postmates
Photo by Smith Collection/Gado/Getty Images

San Francisco-based ride hail company Uber, which also operates food delivery company Uber Eats, is trying to acquire SF-based food delivery company Postmates, the New York Times reports. This is the second time in recent weeks that Uber has attempted to buy its competition, as an effort to purchase Grubhub tanked earlier this month.

Uber’s desire to buy a competing delivery service still makes sense: In its last quarter before the pandemic, it lost $1.1 billion (a 24 percent increase year-over-year). In the first three months of 2020, it lost lost $2.9 billion more, as passengers around the world stayed at home in an effort to avoid COVID-19 infection. The only silver lining, according to CEO Dara Khosrowshahi, was the uptick in orders placed through Uber Eats.

Last month, Khosrowshahi told staff that Uber Eats was the company’s “next enormous growth opportunity,” up 54 percent even as the ride hail business decreased by 80 percent. As a result, Uber would switch focus from moving people to moving food, Khosrowshahi said, laying 6,700 folks off in the process.

Uber’s effort to become the country’s biggest delivery player didn’t go as planned, however. The two sides couldn’t agree on a purchase price, and Grubhub was instead snapped up by Just Eat Takeaway, a European company unlikely to inspire the regulatory agita that — even prior to the abortive sale — UberGrub might have, as legislators were already voicing disapproval of a merger.

Spurned by its first choice, Uber has switched its attentions to Postmates, the Wall Street Journal reports, citing anonymous sources (representatives from Uber and Postmates have not responded to Eater SF’s request for comment as of publication time). This deal would be a much smaller one than the Grubhub one, if the reporting is correct: According to Reuters, the Grub offer was a $6.5 billion, all-stock offer.

By comparison, Uber is only offering $2.6 billion for Postmates, a figure that is perhaps understandable when one looks at the market share for each company. Analysts estimate that as of May 2020, SF-based DoorDash (which also owns Caviar) is the market’s biggest player, with 45 percent of the nation’s delivery business. Grubhub and Uber Eats are neck-in-neck for second place, each capturing around 22 percent. Postmates trails far behind, at 8 percent.

That means an acquisition would vault Uber past Grubhub but still leave it trailing behind DoorDash, at least for now. Postmates appears to be open to a purchase, as according to the NYT, it’s also had unsuccessful sale conversations with DoorDash and Grubhub.

According to the Times’ sources, a deal could be announced within the week or “could fall apart,” but even if all goes well, there are still regulators to deal with. CNBC reports that with only four delivery companies feeding the country’s at-home diners, “any consolidation could raise antitrust concerns.” Given how hostile judges have been to both companies when it comes to matters like compliance with worker protection laws, even if a sale is announced, this story is far from over.