Uber made all-stock offer to acquire GrubHub, WSJ reports
Shares of food delivery company GrubHub are sharply higher after the Wall Street Journal reported that Uber Technologies (UBER) approached GrubHub (GRUB) earlier this year with a takeover offer and the parent company of Uber Eats and its rival service operator continue to discuss a possible combination.
Uber is seeking to acquire GrubHub in an all-stock deal that would reshape the meal-delivery business, but “it’s far from guaranteed the talks will produce a deal,” according to the report.
Bloomberg’s Ed Hammond has separately reported this morning that Uber has made an offer to acquire GrubHub.
The companies are in talks about a deal and could reach an agreement as soon as this month, sources told Bloomberg.
“While our Rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario,” said Uber CEO Dara Khosrowshahi.
Uber Eats is a direct competitor to Grubhub, with Grubhub controlling 26.7% of the market while Uber holds a 25.2% market share.
Grubhub has a market cap of more than $5.3 billion. Uber has a market cap of $57 billion.
GrubHub (GRUB) is seeking 2.15 Uber (UBER) share in exchange for each of its own shares in a potential takeover and Uber’s board is expected to review the latest GrubHub counter proposal, according to The Wall Street Journal, citing sources.
After Bloomberg reported that Uber (UBER) has approached GrubHub (GRUB) with a takeover offer, Needham analyst Brad Erickson said such a deal would be consistent with his bullish thesis that Uber Eats could eliminate as much as $500M of its roughly $1.2B in losses last year through such a GrubHub acquisition.
With Uber having exited India and seven other unprofitable markets, Erickson thinks investors would “further recognize a dramatically clearer picture towards food delivery profitability” if a GrubHub deal were to occur, he added. Erickson reiterates a Buy rating and $42 target on Uber shares.
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