09/17/2020

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Food Delivery Wars Heat Up



Uber May Get Edged Out


On Wednesday, Grubhub (GRUB) announced that it will merge with Just Eat Takeaway.com, a Netherlands-based food delivery company. The all-stock transaction means that Grubhub is turning its back on Uber Technologies (UBER).

Over the past few weeks, Grubhub and Uber were in talks about joining forces, but the companies faced stumbling blocks during negotiations about the merger. Last week, concerns about antitrust laws surfaced and the companies disagreed about which one would shoulder the most risk. The fissure left room for other suitors to make offers to Grubhub. This included Just Eat Takeaway.com and German giant, Delivery Hero.

The Impact of Coronavirus and Increased Competition


During coronavirus lockdowns, ridership for companies like Lyft (LYFT) and Uber tanked and revenue tumbled. On the flipside, because people were confined to their homes, there was a spike in online and mobile ordering.

This dynamic brought on by the pandemic intensified the existing competition between services like UberEats, Grubhub, and DoorDash. In fact, even before coronavirus, DoorDash was gobbling up market share with promotions and discounts. According to Second Measure, DoorDash accounts for over 40% of the on-demand food delivery market. Grubhub has just under 30% and UberEats only has 20%.

This is all to say that the potential merger between Uber and Grubhub was seen as a way for the ridesharing company to double-down on a segment of its business that has seen an uptick in demand. It is estimated that 10% of restaurant sales will come from delivery by 2022, so even once the pandemic subsides and people can dine out again, food delivery will continue to grow.

What to Watch


Just Eat Takeaway.com is no stranger to mergers and acquisitions. In July 2019, the Dutch food deliverer Takeaway.com NV combined with London-listed Just Eat PLC in a $11.1 billion deal which created the company that is now known as Just Eat Takeaway.com. The goal of combining the two companies was to take on the likes of Amazon (AMZN), which has invested in Deliveroo and Uber. Just Eat Takeaway.com does not have a foothold in the US, so the Grubhub merger will open up many new opportunities for the company.

In terms of what to watch next, Just Eat Takeaway.com shareholders will need to sign off on the merger. Complications could potentially arise as a result of the transatlantic nature of the deal, especially as it relates to using stock for the purchase. Lastly, it’s no sure thing, but there may be less antitrust scrutiny surrounding the partnership, given the fact that Just Eat Takeaway.com does not have a presence in the US. Grubhub and Just Eat Takeaway.com said they expect the deal to close in the first quarter of next year.


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