Uber has made a takeover offer to buy Postmates, the upstart delivery service, according to three people familiar with the matter, as the on-demand food delivery market consolidates and Uber looks for new ways to make money.
The two companies could reach a deal as early as Monday evening, according to the people, who spoke on the condition of anonymity because they were not authorized to do so publicly. The talks are still going on, the people cautioned, and any potential for a deal could fall apart.
Representatives of Uber and Postmates declined to comment on any potential deal talks.
A tie-up could bolster Uber’s delivery business, Uber Eats, and help it compensate for the cratering of its core ride-hailing business, which has collapsed in many cities because of the coronavirus pandemic. Food delivery is not profitable, but demand has soared while restaurants are closed and people are staying at home.
The deal would also be a lifeline for Postmates, a 9-year-old company that was one of the earlier startups to harness the power of the smartphone and the nascent “gig economy” to offer city dwellers a courier service that could deliver anything at the tap of a button.
The value of the takeover offer was not clear Monday evening.
While Postmates saw early popularity in coastal cities – especially Los Angeles – the company has struggled to compete with much larger competitors like DoorDash, Grubhub and Uber Eats. In February, Postmates confidentially filed to go public.
The category has been ripe for consolidation. Uber held merger talks this year with Grubhub, a food delivery competitor. But those talks fell apart after the two companies could not agree on a price, two people familiar with the matter said. Grubhub was eventually bought by Just Eats, a European food delivery service, for $7.3-billion in June.
Shortly after the Grubhub deal fell through, Uber began to piece together a potential offer for Postmates, one of the few stand-alone American companies in food delivery.
Postmates also held sale talks with DoorDash and Grubhub over the last year, according to two people with knowledge of the situation, who declined to be identified because the talks were private.
Postmates was created in 2011 by Sam Street, Sean Plaice and Bastian Lehmann, who is the chief executive. It managed to capture the hearts of Hollywood, with endorsements from celebrities like Kylie Jenner and singer John Legend. It even scored an investment from actor Jared Leto.
But Postmates, last valued by investors at $2.4-billion, remains a small player in a fiercely competitive market. The other large private company, DoorDash, which investors have valued at $16-billion, confidentially filed to go public in February.
Though not a direct comparison because the companies calculate fees and discounts differently, Grubhub reported $1.3-billion in revenue in 2019 and Uber Eats reported $1.4-billion.
Postmates and its rivals face regulatory hurdles. California recently passed legislation that may require them to treat delivery drivers as employees rather than as independent contractors. That would mean the companies would have to offer drivers full-time benefits such as health care. Other states are considering similar legislation.
Postmates is supporting a California ballot measure to overturn the law, which is known as Assembly Bill 5.