Uber to buy Postmates for $2.65 bn in an all-stock agreement: Report

Founded in 2011, San Francisco-based Postmates accounted for 8% of the U.S. meal delivery market in May, according to analytics firm Second Measure.

Ride-sharing company Uber Technologies Inc has agreed on a deal to buy food-delivery app Postmates Inc in a $2.65 billion all-stock agreement, Bloomberg News reported late Sunday, citing people familiar with the matter.

The deal has been approved by Uber's board and could be announced as soon as Monday, Bloomberg reported, adding that Pierre-Dimitri Gore-Coty, head of Uber's food delivery business, Uber Eats, is expected to continue to run the combined delivery business.

Uber and Postmates did not immediately respond to a Reuters request for comment.

Last week, Reuters reported that Postmates had revived plans for an initial public offering following dealmaking in the U.S. online food delivery service sector that sparked acquisition interest in the company.

Postmates was last valued at $2.4 billion, when it raised $225 million in a private fundraising round last September.

Founded in 2011, San Francisco-based Postmates accounted for 8% of the U.S. meal delivery market in May, according to analytics firm Second Measure.

Uber had plans to also acquire Grubhub Inc through its Uber Eats business, but walked away from the deal as Just Eat Takeaway.com NV eventually reached a $7.3 billion agreement last month to buy the U.S. online food delivery company.

Duopoly catches up in food delivery space as Zomato acquires Uber Eats

The Uber Eats deal helps Zomato to catapult to the number one slot, leaving market leader Swiggy slightly behind.

If the telecom industry runs the risk of becoming a duopoly, the fast growing $4-billion online food delivery space has already turned into a two-horse race. Cab aggregator Uber India’s sale of its food delivery business on Tuesday has clearly set the stage for a Zomato versus Swiggy play.

The signs of consolidation were already there as losses piled up. Last year, Uber India’s rival, Ola, which had earlier acquired Foodpanda, closed down its online food delivery business to move into cloud kitchen services due to aggressive competition.

Seven months later, there’s no room for a third entity in the fight for domination.

In an all stock deal, Uber will get a 9.9 per cent stake in Zomato. According to analysts, the value of the deal is in the region of $350-400 million.

RedSeer data shows that revenues have seen significant growth—up to 150 per cent in 2019—in the food delivery business. But, losses have hit the roof. In many cases, the losses surpass the revenues.

The huge discounts to acquire customers, clubbed with high delivery costs and aggressive promotions, have caused the bloodbath. Even so, the customer numbers are impressive, helping in the subsequent funding rounds.

Indeed, cash strapped companies have always looked for fresh funding to continue to grow. For instance, in the case of Uber Eats, India made up for more than 3 per cent of its global gross revenues in the last three quarters and it already grabbed 12 per cent of the market share. At the same time, around 25 per cent of Uber Eats’ global losses came from India in the corresponding period.

Profitability, a goalpost for investors, has been a mirage in the food delivery business. Even Zomato, backed by Alibaba, has been struggling to make money with its losses rising tenfold in March 2019 to cross the Rs 1,000-crore figure. Its revenues in the same period soared 188 per cent to Rs 1,397 crore.

Company News

Uber's revenue improves but user growth, food delivery orders disappoints

San Francisco-based Uber is seeking to assure investors it can evolve from a ride-hailing service to a global all-in-one transportation platform.

Uber Technologies Inc. disappointed investors with quarterly results showing lackluster gains in bookings and monthly active users, two of the metrics most closely watched by Wall Street.

The ride-hailing company beat estimates for quarterly revenue and loss, improved its annual loss forecast and pledged to turn a profit by 2021. Those weren’t enough to lift the stock, though. Shares were down about 5 per cent in extended trading after the results.

The San Francisco-based company is seeking to assure investors it can evolve from a ride-hailing service to a global all-in-one transportation platform. There could be more pressure on Uber shares Wednesday, when a stock lockup for a large swath of shareholders expires. An additional 1.5 billion shares could be eligible to trade according to Renaissance Capital, nearly doubling the total number outstanding. Of venture-backed companies, only Alibaba Group Holding Ltd. had a larger lockup of 1.6 billion shares.

While Uber’s overall results were good, uncertainty about the possibility of new shares flooding the market cast a shadow that may have depressed share price, said Ali Mogharabi, an analyst at Morningstar.

“It may be people getting out now, thinking that after Wednesday it’ll drop,” he said.

On a conference call with reporters following the report, Uber executives said the company would spend less aggressively and turn an adjusted profit in 2021. “We will be driving discipline across the company and only doing investments that we can afford,” said Chief Executive Officer Dara Khosrowshahi.

The forecast echoed a commitment from Uber’s smaller rival, Lyft Inc., which said it would be profitable by the fourth quarter of 2021, a year earlier than previously expected. Lyft, which focuses exclusively on transportation, blew past analysts’ third-quarter estimates when it reported results last week.

Business Standard

Facing heat from restaurants, Zomato suspends Infinity Dining programme

Introduced in July, the Infinity Dining programme allowed Zomato's Gold subscribers to order unlimited food and drinks at a set price from the menu of partner restaurants.

Facing heat from partner restaurants over its "deep discounting schemes", food delivery platform Zomato has suspended the Infinity Dining programme from its app.

A Zomato spokesperson confirmed the development to The Economic Times, saying they have received "a range of feedback about Infinity Dining, and have paused it as we incorporate the feedback".

Introduced in July, the Infinity Dining programme allowed Zomato's Gold subscribers to order unlimited food and drinks at a set price from the menu of partner restaurants for a limited period of time.

The programme was launched in three cities with over 300 restaurants.

The National Restaurant Association of India (NRAI) said it a was "huge victory" for them.

“Infinity was the tipping point of the logout campaign. It is a huge victory for restaurant companies that it has been withdrawn,” NRAI Mumbai chapter head Anurag Katriar told the business daily.

Online food delivery aggregators, especially Zomato, and NRAI are at loggerheads for over a month.

The restaurant association had started #Logout campaign on August 14 against aggressive pricing and deep discounting by restaurant aggregators. Following which many eateries had had left these platforms.

The issue has been going back and forth between both sides since then, with Zomato’s Gold scheme being at the centre of much discussion around deep discounting. Zomato Gold began last year as an exclusive, invite-only service, targeted at high-end restaurants serving niche customers who may already be their patrons.

In August, Zomato's founder Deepinder Goyal had admitted that his company made mistakes with its premium subscription service ‘Gold’ and would make changes to the appease restaurants.

“Somewhere, we have made mistakes and things haven’t gone as planned. This is a wake-up call that we need to do 100x more for our restaurant partners than we have done before,” Goyal tweeted.

Business Standard