Uber Will Buy Postmates for $2.65 Billion in Stock

Uber's deal to buy Postmates fits into its diversification strategy, with ride traffic falling amid the coronavirus pandemic.

Ride-hailing giant Uber Technologies  (UBER) - Get Report agreed to acquire food delivery service Postmates for $2.65 billion in stock.

Postmates sits well behind market-leading DoorDash, but still commands a near 10% slice of the U.S. food delivery market. Postmates has strong positions in Los Angeles and the southwestern U.S.

The deal fits into Uber's diversification strategy, with ride traffic falling amid the coronavirus pandemic, and softens the blow of losing out to Just Eat Takeaway in last month's $7.3 billion battle for Grubhub GRUB. 

“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery - they can be a hugely important part of local commerce and communities, all the more important during crises like Covid-19," said Uber CEO Dara Khosrowshahi in a statement Monday.

"As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100% year on year. We’re thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country,” Khosrowshahi added.

Uber said last month a surge in food delivery orders over the first quarter helped revenue beat Wall Street forecasts, even as the company posted a loss of nearly $3 billion for the three months ended in March.

Revenue at Uber Eats rose 53% from last year, the company said, as customers used the food delivery service amid coronavirus lockdown orders. 

"Postmates should continue to benefit from restaurant selection and strong positions in key markets. However, as the fourth-largest player in the US market, we also see it as a potential consolidation target," said Canaccord Genuity analyst Maria Ripps in a recent client note.

The head of Uber Eats, Pierre-Dimitri Gore-Coty, is expected to continue to run Uber’s combined delivery business, Bloomberg reported, citing according to a person close to the matter. Postmates CEO Bastian Lehmann and his team will stay on to manage Postmates as a separate service, another person said.

Uber rose 4.11% to $31.94 in trading Monday.