Uber makes an offer to buy Postmates delivery service

SAN FRANCISCO – Uber has made a takeover bid to buy Postmates, the new delivery service, according to three people familiar with the matter, as the grocery delivery market consolidates and Uber looks for new ways to make money.

The two companies could reach an agreement as early as Monday night, according to people, who spoke on condition of anonymity because they were not authorized to do so publicly. The talks are still going on, people warned, and any potential for a deal could crumble.

Representatives for Uber and Postmates declined to comment on possible settlement talks.

A deal could bolster Uber’s delivery business, Uber Eats, and help offset the crater of its core passenger transportation business, which has collapsed in many cities due to the coronavirus pandemic. Food delivery is not profitable, but demand has skyrocketed while restaurants are closed and people stay home.

The deal would also be a lifeline for Postmates, a nine-year-old company that was one of the first companies to harness the power of the smartphone and the nascent “concert economy” to offer city dwellers a messaging service that could offer anything at the touch of a button.

The value of the takeover bid was unclear Monday night.

While Postmates saw early popularity in coastal cities, especially Los Angeles, the company has struggled to compete with much larger competitors like DoorDash, GrubHub, and Uber Eats. In February, Postmates filed confidentially to go public.

The category has matured for consolidation. Uber held merger talks this year with GrubHub, a food delivery competitor. But those talks fell apart after the two companies were unable to reach a price agreement, two people familiar with the matter said. GrubHub was finally purchased by Just Eats, a European food delivery service, for $ 7.3 billion in June.

Shortly after the GrubHub deal fell through, Uber began crafting a potential offering for Postmates, one of the few independent American food delivery companies.

Postmates also held sales conversations with DoorDash and GrubHub for the past year, according to two people with knowledge of the situation, who declined to be identified because the conversations were private.

Postmates was created in 2011 by Sam Street, Sean Plaice, and Bastian Lehmann, who is the CEO. He managed to capture the hearts of Hollywood, backed by celebrities like Kylie Jenner and singer John Legend. He even got an investment from actor Jared Leto.

But Postmates, last valued by investors at $ 2.4 billion, remains a small player in a fiercely competitive market. The other major private company, DoorDash, which investors have valued at $ 12.7 billion, secretly filed to go public in February.

While not a direct comparison because companies calculate rates and discounts differently, GrubHub reported $ 1.3 billion in revenue in 2019, and Uber Eats reported $ 1.4 billion.

Postmates and their rivals face regulatory hurdles. California recently passed legislation that may require them to treat delivery drivers as employees rather than independent contractors. That would mean that companies would have to offer drivers full-time benefits, such as health care. Other states are considering similar legislation.

Postmates is supporting a California ballot measure to repeal the law, known as Assembly Bill 5.