Uber Values Grubhub at $6 Billion -- WSJ
14 Maggio 2020 - 9:02AM
Dow Jones News
Companies see potential in deal for more than $300 million in
cost savings
By Cara Lombardo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 14, 2020).
Uber Technologies Inc. and Grubhub Inc. are discussing a
takeover valuing Grubhub at roughly $6 billion, with big cost
savings that would help pay for the deal, according to people
familiar with the matter.
The companies are considering a deal that would value Grubhub
stock at around 1.9 Uber shares, or just over $60 per Grubhub share
based on trading Wednesday afternoon, the people said.
Grubhub had been seeking 2.15 Uber shares in the negotiations,
The Wall Street Journal reported Tuesday, but Uber balked at paying
that much. The potential price has jumped around since the latest
discussions began in February and may continue to do so -- assuming
the talks continue.
Grubhub shares soared 29% Tuesday, the day the merger talks
surfaced, closing at $60.39. They dropped to $58.14 Wednesday amid
a broader market selloff. Uber stock closed up 1.9% at $33.02 after
The Wall Street Journal reported on details of the discussions.
Uber and Grubhub see opportunity in the rapidly changing
industry landscape. Meal-delivery companies have been scrambling to
respond to increased demand as the coronavirus pandemic confines
people to their homes and increases the cost of delivering food
safely.
Encouraging Uber and Grubhub to strike a deal now is the
potential for enormous cost savings, likely north of $300 million,
the people said. That is an especially large number for a
transaction this size.
A big part of that comes from improved logistics. By utilizing
Uber's more sophisticated routing platform, Grubhub could
potentially save $2 to $3 on each of the orders it delivers itself,
which amount to roughly half of its more than 500,000 daily
deliveries, some of the people said. A large portion of Grubhub's
orders are delivered by restaurants themselves, as almost all of
Uber's are delivered by its drivers.
The combined company could also save on marketing expenses.
Savings are also likely to come from slowing hiring or
potentially eliminating jobs, the people said. That possibility is
certain to stoke concerns among politicians -- including some
Democrats who have called for a pause on mergers-and-acquisition
activity during the pandemic in an attempt to limit job losses.
Uber -- whose food-delivery business has become a bright spot
during the pandemic as ride-hailing demand plummets -- could also
benefit from Grubhub's expertise in building out new markets and
forging relationships with small- and medium-size restaurants.
The companies' CEOs, Dara Khosrowshahi and Matt Maloney, have
known each other for years and are discussing many of the details
personally, some of the people said. While the newly appointed head
of Uber's meal-delivery business, Pierre-Dimitri Gore-Coty, is
expected to retain his position in a combined company, Mr. Maloney
would likely be offered an executive role too.
Should there be a deal, it is still likely a few weeks away,
some of the people said. The talks had somewhat slowed before
Uber's stock jumped on its better-than-expected first-quarter
earnings report last week.
Even if there is an agreement, the deal would still have to pass
regulatory muster. It would create a dominant player in the
food-delivery space for the first time in years.
On Wednesday, Sen. Amy Klobuchar (D., Minn.) said the potential
deal "raises serious concerns" about the impact on customers at a
time when they need food delivery services the most.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
May 14, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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