Food Delivery Wars Heat Up

Uber May Get Edged Out

On Wednesday, Grubhub (GRUB) announced that it will merge with Just Eat, 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 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 is no stranger to mergers and acquisitions. In July 2019, the Dutch food deliverer 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 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 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 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 does not have a presence in the US. Grubhub and Just Eat said they expect the deal to close in the first quarter of next year.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT SoFi SoFi helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing, and protecting give our more than one million members fast access to tools to get their money right. SoFi membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of like-minded, ambitious people. For more information, visit Want an easy and convenient way to manage your financial life? Get the SoFi app. For iOS and Android.

TLS 1.2 Encrypted
Equal Housing Lender