Possible Purchase Deal By Uber Triggers Surge In Grubhub Shares

Shares in Grubhub soared as much as 38 percent Tuesday (May 12) on news that Uber is looking to buy the Chicago-based food-delivery platform.

Trading on Grubhub was temporarily halted twice during the session, most recently at around 1 p.m. ET for “news pending.” Uber’s stock also climbed 6 percent on the news, which pushed Grubhub’s valuation up from roughly $4.5 billion Monday to about $5.9 billion. Uber has an approximate $56 billion market capitalization.

Uber had been in talks to acquire DoorDash, but a deal never surfaced, a source familiar with the matter told CNBC.

Grubhub denied rumors in January that Uber was inquiring about making a deal. People familiar with the matter told the Wall Street Journal that talks did start earlier this year and have continued. Whether a deal will be made is still up in the air. Uber and Grubhub reportedly were in talks on an all-stock offer by Uber to buy Grubhub, but the two sides remained at odds on the deal, CNBC reported Tuesday. 

Grubhub released a statement Tuesday not acknowledging or denying the talks, but admitting “consolidation could make sense in our industry.”

“Like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment,” Grubhub’s statement continued.

Founded in 2004, Grubhub went public in less than six years. Uber’s initial public offering (IPO) closed last year after a failed attempt earlier.

The pandemic has helped Grubhub’s earnings, and the company posted a 24 percent year-over-year increase in active diners and an 8 percent year-over-year increase in gross food sales in the first quarter of 2020 compared to the same period in 2019.

A letter to shareholders signed by Adam DeWitt, president and CFO, as well as founder and CEO Matt Maloney, reported that Grubhub is seeing “record new partnered independent restaurant additions” as states have limited dine-in capacity throughout the nation. The company reported that it added approximately the same number of net new partnered eateries in March and April as it did during all of the second half of last year.

Uber, meanwhile, retracted its 2020 guidance, anticipating a $1.9 billion to $2.2 billion impairment charge and $17 million to $22 million in first-quarter losses. Its Uber Eats division did better, with bookings and revenues up over 50 percent during the first quarter. 

“Given the evolving nature of COVID-19 and the uncertainty it has caused for every industry in every part of the world, it is impossible to predict with precision the pandemic’s cumulative impact on our future financial results,” Uber said in a statement on April 16.

Uber’s latest annual report shows it has minority stakes in Didi, Grab, Yandex.Taxi and Zomato.