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Uber fails to seal deal with rival, Grubhub stock soars 30%

Uber stock

Moves by Uber (NYSE: UBER) to build the largest meal delivery company in the US by buying rival Grubhub GrubHub (NYSE: GRUB) ended for the moment when the pair could not agree a merger.

Grubhub stock trading climbed as much as 39% in New York, after being temporarily suspended. The firm’ shares were up 29% at the close of trading in New York on Tuesday, valuing it at $5.6bn. Uber, with a market value of $56bn, rose 2.3%.

Both companies have been aggressively working on a deal, but both sides are yet to agree on the price, according to the Wall Street Journal.

A combination of Uber Eats and Grubhub would account for around 55% of the US meal delivery market, with DoorDash having 35%.

Uber stock

The Chicago-based Grubhub has generated year over year revenue growth of 30% to $1.3bn in fiscal 2019, with expectations that revenue will grow at a double-digit rate in the following years.

“As we have consistently said, consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities, Grubhub said in the statement. “We remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”

Meanwhile, San Francisco-based Uber has been actively pursuing growth opportunities for its delivery business called Uber Eats, resulting in year over year revenue growth of 54% to $4.68bn in the first quarter.

The acquisition of online food delivery business, which has a strong presence across all US cities, would significantly bolster revenue growth opportunities for the Eats segment.

“Building on the steps we have already taken, we are continuing to look at all levers to ensure our core Eats businesses provide more value to our customers,” Uber said in a statement.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.