Uber is reportedly in talks to acquire rival food delivery service GrubHub.
Ridesharing and food delivery company Uber is reportedly in talks to acquire rival food delivery service GrubHub in an all-stock deal.
The acquisition comes amid a series of Corona virus-related shutdowns, but all of them have shut down Uber’s ridesharing service while intensifying the need for food delivery at home.
Doubles – Uber and GrubHub
The move marks the endorsement of Uber, which is currently focusing on food delivery. While its primary ride-sharing function is its most recognizable service, by 2019, Uber Eats has already become a highly profitable venture.
Now that there are plenty of fears about social gathering restrictions, workplace closures and limited locations, Uber is trying to embrace and squeeze its second most popular market segment.
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“If you can’t beat them, eat them.”
There are now three major players in the food delivery industry. As of March, DoorDash handled 42% of sales, with Grubb 28% and Uber Eats last with 20%.
Uber has a double incentive to swallow Grubb now, before moving to Tour Dash. By getting the second-largest player in the food delivery game, Uber will not only knock down an enemy, but Uber will become the market leader on the day the deal closes.
Jesse Reyes, CEO of J-Curve Advisors, talks about Uber’s strategy, “If you can’t beat them, eat them.”
Pessimistic concerns
Uber’s fight for the competition raises some alarm among monopolistic watchdogs.
Representative David Cicilline (D-RI), chairman of the House Antitrust Subcommittee, calls Uber “a bad predatory company that is denying its drivers long-term pay.”
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He continues, “The attempt to acquire Groupe, which has a history of exploiting local restaurants with deceptive tactics and extortion fees, marks a new downturn in the profitability of the epidemic.”
While Uber’s move is certainly opportunistic, is it illegal? There are no antitrust laws to protect small businesses from being put out of the market by the unbeatable Goliath.
Such laws seek to prevent compliance between large corporations to prevent predatory pricing to prevent other companies from entering the market and avoiding fair competition.
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The acquisition of Uber could be conducted under strict scrutiny, particularly by the democratically controlled House of Representatives.
Hackling constantly
No official acquisition has been confirmed yet, but the two companies are discussing how to better combine forces. A GrubHub report confirmed the move was at least being considered, adding that “consolidation in our industry would be meaningful.”
Meanwhile, rumours are rife that the two companies conflict, with Uber, reportedly declining all equity offers, and Grubb demanding that investors acquire 2.15 Uber shares for each share.
Uber’s board of directors may meet in the coming days to review the proposal.
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