Uber Technologies Inc. is reportedly intending to purchase Postmates Inc., a food-delivery service provider, following its failed bid to acquire the publicly traded company, Grubhub Inc.
The San Francisco-based ride-hailing company is planning to have a stronger foothold in the food delivery landscape due to the downfall of its ride business and the increasing number of COVID-19 infected people across the globe.
The economic downturn caused by the coronavirus pandemic has led the company to reduce nearly a quarter of its workforce in May 2020. Ride services offered by Uber accounted for nearly three quarter of the revenue share pre-pandemic. However, the demand for rides dropped by nearly 80% in April 2020. The sudden virus outbreak has wrecked the core business and functioning of Uber’s business. Its ride-hailing gross booking is likely to decline by 62% in the 2nd quarter as compared to the 1st quarter of 2020.
Uber’s Chief Executive Officer, Dara Khosrowshahi, has stated that the company had planned to lower $1 billion in fixed costs after the government imposed various regulations such as social distancing guidelines to curb the spread of the virus. He further stated that Uber Eats, its food delivery arm, can be considered a robust segment for business growth. In the 1st quarter of 2020, the gross bookings of Uber Eats surged by 52% from a year earlier, amounting to $4.68 billion. The 2nd quarter gross booking of the category is expected to surge by 65% to $5.6 billion from 2019.
The shares of Uber have increased after reports of the company’s intention to acquire Postmates for $2.6 billion came to light. The deal can potentially help the company expand its footprints in Phoenix and Los Angeles, where Postmates has 19% and 35% of the shares in these markets, respectively.
The company had previously attempted to purchase Grubhub. After the failed attempt, it shifted its target to a small U.S. player, Postmates, to considerably drive growth during the crisis.
Uber is yet to respond to requests for comments on the recent deal.