Grubhub Tells Uber No Deal But Negotiations Still At Play

Uber’s Sunday (May 17) acquisition offer of 1.9 of its shares for each Grubhub share is not enough to close a deal, but discussions are still ongoing, according to a Wall Street Journal (WSJ) report citing sources familiar with the talks.

Uber CEO Dara Khosrowshahi said he could go up to 1.95, but that is still lower than Grubhub’s asking price of 2.15 Uber shares per Grubhub share. It’s unlikely the two food delivery powerhouses will close a deal in the coming days, the sources told the WSJ. Uber had previously rejected that offer.

At the close of the trading day on Friday (May 15), Grubhub shares were $54.97; Uber closed at $32.47. A ratio of 1.925 would give Grubhub a valuation of $6 billion, about $62.50 a share, according to the report.

European food delivery startups Delivery Hero and Just Eat Takeaway.com NV were also said to be pondering an offer to acquire Grubhub, but they will likely step aside while Uber is making a play, sources told the WSJ.

Last week Uber offered about $60 per Grubhub share, based on Wednesday (May 13) trading. If a merger deal eventually goes through, the combined company would control more than half of the food delivery market across the U.S. 

Morgan Stanley analyst Brian Nowak said in a note on Wednesday (May 13) that if the two delivery giants merged, cost savings could be twice as much as the $300 million Uber and Grubhub estimated. 

Pending M&A regulations could interfere with the merger even if Uber and Grubhub agree on terms. The Pandemic Anti-Monopoly Act proposed by Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez would pause M&A amid the global coronavirus pandemic.

Stay-home mandates amid the crisis caused an uptick in the demand for food delivery as most other businesses saw revenue evaporate.

According to the most recent PYMNTS Provider Rankings, which track mobile app markets monthly, Uber Eats and Grubhub always ranked in the top five but were beat by DoorDash this month.