The Wall Street Journal reports that Uber Technologies is in talks to acquire delivery service Postmates for a cost of about $2.6 billion.
Such a deal, if it is reached, would allow Uber to supplement its Uber Eats business, while continuing the delivery segment's consolidation trend. Early this month, Uber tried to buy GrubHub but was outbid by Just Eat Takeaway, which spent $7 billion to make the acquisition.
The Journal notes that "Postmates, which has held discussions with other possible buyers since at least last year, has been simultaneously planning an initial public offering. Just Monday, people familiar with the matter said the closely held meal-delivery startup was preparing in the coming days to make its IPO filing public, which could presage a trading debut later this summer."
The story points out that "there has been a beehive of deal activity lately among food-delivery companies, which are seeking to better position themselves amid cutthroat competition and as the coronavirus pandemic boosts demand. By combining forces and cutting costs, the companies could jump-start their path to profitability, something investors are increasingly eager to see." Consolidation is seen as a way to bring profitability to a segment in which most players either are losing money or barely breaking even; the pandemic-related problems facing the restaurant industry has not helped.
- KC's View:
If the economics of the segment are questionable, that would suggest to me that we're likely to see some pricing increases as consolidated companies look to make a buck. It also seems likely that we're likely to see some boundary busting, as delivery companies that previously served mostly fast feeders branch out to work with supermarkets, figuring that there is money to be found in the category. All of which could lead to even more consolidation.