Lockdown gives Uber the munchies

Lockdown gives householders — and Uber — the munchies. Last week the US online taxi company led an investment in scooter company Lime. Now Uber wants to buy Grubhub, the Chicago-based food delivery company that competes with its own Uber Eats business. The deal will look tastier to investors than trust busters. Food delivery is a burgeoning industry and one of the few to benefit from lockdowns. In the US, meal delivery services grew 24 per cent year-over-year by the end of March… Most delivery is now via a third-party app… Yet the fight for customers and restaurants is costly. Uber has cash of $9 billion. This is more than enough to fund a premium purchase of Grubhub, which had an undisturbed market value of $4.4 billion. But Uber is also burning cash. It recorded a free cash flow deficit of more than $500 million in the first quarter. The second quarter is expected to be worse. Grubhub, for its part, is ebitda positive. The business could speed Uber’s own progress to profitability — a goal the company has been pursuing for the past year… Buying Grubhub would make Uber the biggest company in the food delivery industry, with about a 48 per cent share… Yet DoorDash would still have 42 per cent of the market. Price wars would continue. 

Lex.

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