GRUB GrubHub Inc

By Cara Lombardo 

Uber Technologies Inc. is seeking to acquire Grubhub Inc. in an all-stock deal that would unite two of the biggest players in meal delivery at a time when the coronavirus pandemic has sparked a surge in demand for their services.

Uber, which in addition to its flagship ride business operates a big meal-delivery unit known as Uber Eats, earlier this year approached Grubhub with a takeover offer and the companies continue to discuss a possible combination, according to people familiar with the matter.

Grubhub recently proposed a deal in which its shareholders would receive 2.15 Uber shares for each Grubhub share, some of the people said. Uber's board is expected to review that proposal in the coming days. Before news of the bid broke, that would have amounted to roughly $68 for each Grubhub share.

Grubhub's shares closed at $46.79 Monday and jumped more than 25% Tuesday on the news.

It is not guaranteed the talks will produce a deal.

Should one come to pass, it would reshape the meal-delivery business, a key pillar of the new economy whose prominence has been heightened by the pandemic.

As of earlier Tuesday morning, Grubhub had a market value of $4.4 billion while Uber's was $54 billion.

The Wall Street Journal reported in January that Grubhub had tapped financial advisers to consider a possible sale. In a sign that Uber shareholders welcomed the possibility of consolidation, the ride-hailing company's shares rose on that report. Just weeks later, Uber made its initial approach, in February, some of the people said. Uber's shares rose about 7% Tuesday afternoon to $33.98 but are still down from their IPO price of $45. The company went public to much fanfare last year but investors have been cool to the shares in the face of its copious losses.

"We are always looking at value-enhancing opportunities," Grubhub said in a statement. "That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment."

Uber said in a statement it is "constantly looking at ways to provide more value to our customers, across all of the businesses we operate" and has shown itself to be disciplined with capital.

A combined company would have the industry's most expansive footprint, combining Grubhub's strength in large U.S. markets including New York with Uber Eats' operations around the globe. It could also help stem losses from the cost-intensive business of building out delivery operations and luring customers.

Competition in the nascent food-delivery industry, which ferries takeout orders from restaurants to homes and businesses, has intensified as newcomers try to grab market share with discounts and promotions. At the same time, restaurants are pushing back against the fees delivery companies charge, squeezing Grubhub and its competitors. Investors and analysts have said the industry needs consolidation, with many seeing room for little more than two major players.

Uber Chief Executive Dara Khosrowshahi has said its delivery business plans to leave markets where it isn't the No. 1 or 2 player, but widespread stay-at-home orders prompted by the pandemic have gutted demand for the company's ride-sharing business and made Eats a bright spot.

Other major food-delivery companies include Postmates Inc. and DoorDash Inc., which like Uber is backed by Japanese conglomerate SoftBank Group Corp. DoorDash and Postmates are each eyeing stock-market listings, possibly this year, and have explored merging with companies that are already public as an alternative to an initial public offering.

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

May 12, 2020 14:15 ET (18:15 GMT)

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