Uber said Monday that it is acquiring Postmates, a move that adds to the ride-hailing company's efforts to control more of the food delivery market amid a slowdown in its core business.
The deal, an all-stock transaction worth $2.7 billion,will allow Uber to boost its existing delivery arm, Uber Eats. Postmates offers delivery on a wide variety of restaurants and operates in 4,200 cities. It is particularly popular in Los Angeles, Phoenix and Miami.
The New York Times first reported in late June that Uber made an offer for Postmates.
“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery — they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19," said Uber CEO Dara Khosrowshahi in a news release. "As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100 percent year on year. We’re thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country.”
Business for ride-hailing and ride-sharing services has dropped during the coronavirus pandemic, putting Uber in a difficult position. The company said in February that it would lose more than $1 billion in 2020 but be able to turn a profit in the last three months of the year.
The pandemic has cast significant doubt on those plans, but it has also driven a surge in demand for food delivery, since restaurants in most cities are only open for delivery or pickup and many people are still isolating at home.
Even before the pandemic, Uber Eats was a fast-growing part of the company. In May, Uber released first-quarter results for 2020 showing that gross bookings for Uber Eats rose 54 percent compared to last year. By comparison, CEO Dara Khosrowshahi said on the related earnings call that its rides business was down around 80 percent in April compared to 2019.
Earlier this year, Uber had reportedly tried to buy GrubHub, which was later acquired by Just Eat Takeaway.
The deal will also benefit Postmates, which has faced tough competition from other delivery services like DoorDash, GrubHub and even Uber Eats.
Postmates, a private company that was valued at $2.4 billion when it raised money from investors in September, is small in comparison to some of its rivals. DoorDash is valued at $16 billion and has topped the food delivery space since May 2019, according to data from Edison Trends, which studies e-receipts from U.S. transactions.
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That data showed DoorDash was responsible for 45 percent of all transactions in April 2020. Uber Eats logged 28 percent, while GrubHub had 17 percent and Postmates accounted for 7 percent.
Before the deal with Uber was finalized, there was speculation Postmates would become a publicly traded company. In February 2019, it confidentially filed for an initial public offering to make its stock available on a public exchange but hadn't moved forward with the process. Uber went public in May 2019.