Transport giant Uber Technologies (UBER) has agreed to buy food delivery service Postmates Inc in a $2.65B all-stock deal, according to a report from Bloomberg. According to the report, the deal will be announced later today- and has already been approved by the Uber board of directors.
Uber Eats head Pierre-Dimitri Gore-Coty will continue to run Uber’s combined delivery business, said a Bloomberg source, while Postmates CEO Bastian Lehmann and his team will separately manage Postmates.
Bloomberg writes that although talks between the two companies have been held on-and-off over the last few years, the discussions became serious only in the last week after Uber again approached Postmates. Plans could still be subject to change.
Uber recently failed in its bid to acquire GrubHub Inc (GRUB)- losing out to Just Eat Takeaway.com which snapped up the food delivery service for $7.3 billion.
And, as the Bloomberg report points out, the Postmates deal would also enable Uber to ramp up its competitive efforts against DoorDash Inc. Uber Eats would benefit from Postmates ‘strong position’ in Los Angeles and the American Southwest, says the report.
A private-capital fund raise valued Postmates last year at $2.4 billion. Postmates offers local delivery of restaurant-prepared meals and other goods and operates in 2,940 U.S. cities. The service relies on mobile phone applications and their Global Positioning System capabilities to match inventories and consumer demand.
Shares in Uber rose less than 1% to $30.68 as of the close on July 2, taking the stock’s year-to-date gain to 3%. Jake Fuller at BTIG last week maintained a buy on UBER with a $47 price target but cautioned that consensus on the company’s financial performance is likely to be “aggressive”.
Fuller notes that the “ride hail recovery” is taking time, as work-from-home policies persist and work-related ride volume remains challenged. However, he believes risk to estimates appears to be priced in to the current stock price.
The rest of the Street shares Fuller’s bullish outlook. The Strong Buy consensus consists of 26 recent Buy ratings versus 3 Holds and 1 Sell. Meanwhile, the $40.97 average price target implies shares have room to rise 34% in the coming 12 months. (See Uber’s stock analysis on TipRanks).
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