Francisco-based ride-hailing giant, Uber Technologies Inc., has agreed to purchase California-based on-demand food delivery firm, Postmates. According to the reports, the capital of acquisition is roughly estimated to be worth $2.65 billion. As per the agreement, Postmates acquisition is an all-stock buyout, and the Uber Eats head Pierre-Dimitri Gore-Coty will continue to run the delivery business of Postmates and Uber Technologies Inc.
Since Dara Khosrowshahi came on-board as an Uber CEO, the giant has aggressively expanded its presence across similar platforms within the last-mile market and seen to be in moving products or people. In the last mile food delivery space, the fortune of Uber is very important as Uber continues to keep on investing within the ride-hailing business.
Uber constantly keeps on adding more workforce (drivers) over its platform. Alongside this, every quarter, it reports more rides, maintaining its operating expenses high, limiting the giant’s prospects at increasing margins. All these segments led Uber to sell or shut down its ride-hailing operations in several markets and geographies, including Southeast Asia, China, the Middle East, and Russia.
The Eats segment of Uber is considered as the most profitable one. However, it has lost substantial capital lately. During the first-quarter earnings call, in a statement, Dara Khosrowshahi noted that growth at all costs is over. It can be observed that Uber is focusing its energy towards businesses, which also show potential for registering a positive bottom-line.
Before finalizing the acquisition of Postmates, the discussion was under pipeline for about 4 years. In September 2019, Postmates was valued at $2.4 billion, at the same time, it had raised $225 million in venture capital, touching its total funding to nearly $1 billion. Earlier the Uber acquisition, Postmates was seeking to go public by secretly filing an initial public offering (IPO) in February, before rescinding due to the coronavirus outbreak.
Initially, Uber focused on acquiring its publicly-traded rival of the food delivery space named GrubHub. However, a Europe-based food delivery giant, Just Eat Takeway.com, had purchased GrubHub for $7.3 billion in June.
The current Postmates acquisition can surely not considered a predictable reaction to its GrubHub failure. The acquisition of Postmate is evident that Uber is seeking to buy its the same segment firms to increase its market presence. Almost 8% of the food delivery market is accounted for Postmates, as of February, it had completed 5 million deliveries per month.
Keeping the present situation of a coronavirus pandemic in mind, it has been noted that the food delivery services are surging in demand within cities than car rides. Uber has been experiencing this first-hand as its ride-hailing booking has been dropped in demand in the first quarter of 2020. On the other hand, its Eats segment has hiked by 54% compared to the last quarter of 2019. The coronavirus outbreak has been playing a significant role in the current market trend and the functional behavior of the society. However, it is only expected to grow in the near future.
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