Uber Acquires Postmates for US$2.65 Billion

What better time to expand a booming business. Uber reached an agreement to buy food-delivery company Postmates for US$2.65 billion through a stock transaction, which will give the hail-riding company a greater presence in the home-delivery business during the COVID-19 pandemic. “Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery: they can be a huge part of local business and communities, which is even more important during crises like COVID-19,” said Uber's CEO Dara Khosrowshahi in a statement.

According to the New York Times, Uber hopes to merge Postmates with UberEats. Pierre-Dimitri Gore-Coty, current Vice President of Uber Eats, would lead the union of both companies. The transaction is still subject to Postmates' shareholder approval and regulatory approval, which is expected to be complete in 1Q21.

In December last year, food delivery app startup Postmates closed its office in Mexico City. According to analysts, factors that might have precipitated this decision include the intense competition for Mexico City market share with both national and international food delivery app startups such as UberEats, DoorDash, Rappi, SinDelantal and Didi Food. Three months earlier, Postmates raised US$225 million in a financing round among private investors.

Since the COVID-19 contingency began in Mexico, ride-hailing services have seen a drastic impact in their operation. However, home delivery apps have seen an increase in demand due to stay-at-home orders. In March, restaurant consumption through Rappi rose 10.98 percent, while UberEats saw growth of 6.24 percent, revealed a Fintonic report. Likewise, in April, Rappi increased its restaurant orders by 44.34 percent, while Uber Eats surged 24.06 percent and DiDi Food saw a rise in demand for deliveries of 15.12 percent. Meanwhile, in May, consumption in restaurants through Rappi increased 38.58 percent, while UberEats rose 14.80 percent, and DiDi Food increased 4.46 percent.

In 1Q20, UberEats division gave a big boost to Uber’s total revenue of US$3.543 billion, 14 percent more than in 1Q19 as users increased food orders by 52 percent. “In Mexico, we are present in 49 cities in 29 states. Our goal is to reach every Mexican, with more cities and states on our horizon. We want to go from almost 50 cities to 100. At the same time, we are working to expand our geo-footprint in the cities where we already operate. We recently expanded to a few very large neighborhoods on the eastern side of Mexico City. We want to continue our expansions throughout next year, aiming to increase our square kilometer coverage by 30 percent in 2020,” told to MBN José García-Pimentel, Director and General Manager of Uber Eats México.

Uber also wants to grow in the retail segment and in October 2019, the company announced the acquisition of Cornershop, a delivery service platform for groceries. However, both companies are still waiting for the Federal Economic Competition Commission (COFECE) to approve the acquisition in Mexico, which is expected to take place before the end of 2020. The agency must also assess the risks that this acquisition implies for competition in the country. According to analysts, the chances that COFECE will reject the agreement are minimal because, unlike Walmart, Uber does not yet have a share in the retail market.