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Grubhub Seeks Termination-Fee Contingency in Uber Deal

Grubhub wants a breakup fee if the government blocks its takeover by Uber, a media report says.

Grubhub shares  (GRUB) - Get Report rose, as merger talks now focus on the idea that Uber  (UBER) - Get Report, which would be buying the food-delivery specialist, would pay a breakup fee if the government blocks their tieup.

The New York company wants San Francisco ride-hailing giant Uber to commit to a cash payment in the event regulators reject the deal, knowledgeable sources told Bloomberg.

Press reports value a takeover of Grubhub by Uber at $6 billion to $7 billion, or $60 to $70 a share. Barclays analysts said in a research note this month that they saw Grubhub fetching as much as $75 a share.

Grubhub’s market-cap stood around $5.2 billion on Friday afternoon. 

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The potential deal has drawn the attention of government regulators, who are concerned about the hefty fees the companies charge restaurants and the lowly status of their workers, Bloomberg reports.

The food-delivery companies have come under fire from the restaurants, which say that the fees are high enough to render some meals unprofitable for them.

The companies aren't certain to reach agreement on a deal price, and if they do, other items still would have to be negotiated, The Wall Street Journal reported earlier in the month. The deal would combine Grubhub with Uber’s food-delivery unit, Uber Eats.

Grubhub and Uber's food-delivery business have thrived during the coronavirus pandemic, with Grubhub reporting a 12% sales increase for its first quarter.

Grubhub shares recently traded at $57.39, up 8.6%, and Uber was at $35.48, up 3.9%. Grubhub stock has climbed 18% over the past three months, and Uber stock has gained 4%.