While some might consider now to be a bad time to be making out buyout proposals, there are still quite a few companies willing to take the risk at this time. With the uncertainty with the coronavirus, shares of many companies are trading more cheaply than ever before, and that means they are some potentially excellent deals to be had at this time. That’s exactly the case with Postmates, a food delivery service provider that has now been on the receiving end of a buyout offer from Uber (NYSE:UBER).
Uber said that it officially offered a $2.7 billion deal to its rival in the restaurant delivery space, something that would help extend Uber’s dominance in the delivery market. While the top ridesharing company by market cap, Uber still has had to deal with plenty of competition from more niche, specialized businesses out there. Companies like Grubhub and Postmates have long been thorns in Uber’s side, and acquiring them by buying them out has been a long-time ambition for Uber.
“These every day, frequent interactions create habits with customers,” said Uber’s CEO Dara Khosrowshahi in an investor call Monday. “The category and markets are going to start overlapping with a lot of other players.”
Nor is this the first major deal that Uber has considered over the past few weeks. Earlier, the ridesharing giant had gone on to state that it was considering another $6 billion acquisition of GrubHub, news the sent shares of Uber soaring over 30%. While some investors are skeptical about whether making these types of big transactions is a good idea during such uncertain times, in other ways, the buyout could be a good business decision.
Should the coronavirus situation get worse, ridesharing will undoubtedly see a significant decline in traffic. Food deliveries, on the other hand, won’t be hurt as much. In fact, demand for food-delivery services could grow during such a time. While it might be counter intuitive to spend billions of dollars right now on aggressive acquisitions, it could very well be what Uber needs to diversify itself during this situation.
Shares of Uber were up around 6% in light of the news. The biggest problem for the ridesharing giant is that it needs to get its costs under control and start becoming profitable soon. Thankfully, food delivery services have proven to be a surprisingly fast-growing market, with Uber eats reporting an impressive 50% growth rate in the most recent quarter.
Uber Company Profile
Uber Technologies is a technology provider that matches riders with drivers, hungry people with restaurants and food delivery service providers, and shippers with carriers. The firm’s on-demand technology platform could eventually be used for additional products and services, such as autonomous vehicles, delivery via drones, and Uber Elevate, which, as the firm refers to it, provides “aerial ridesharing.” Uber Technologies is headquartered in San Francisco and operates in over 63 countries with over 91 million users that order rides or foods at least once a month. Approximately 83% of its gross revenue comes from ridesharing and 16% from food delivery. – Warrior Trading News