Uber is in talks to buy food delivery startup Postmates, weeks after it lost out in the battle to acquire larger rival Grubhub, according to people briefed about the matter.
The deal, which has been in the works for several days, could be reached as soon as this week, one of the people told the Financial Times. A merger between Uber and Postmates would add to moves towards consolidation in the heavily lossmaking US food delivery market.
However, last month Dutch-based Just Eat Takeaway acquired Grubhub for $7.3bn in an all-stock deal. Regulatory scrutiny was among the reasons the talks between Uber and Grubhub failed, as the enlarged group would have become the largest food delivery company in the US raising monopoly fears.
However, while food delivery orders have been soaring, companies have not been able to make profits and only those with deep pockets or investor backing are able to compete in a fiercely competitive market. Last year, Cowen analysts estimated that Uber was losing $3.36 for every food delivery order and expected it to make losses until at least 2024.
There has been some consolidation in the wider food delivery market. Earlier this year, Uber sold its loss-making food delivery business in India to Zomato for $206m.
Postmates is also exploring an initial public offering, which some investors in the company previously said they would prefer to an acquisition.
Postmates that was founded in 2011 by Sean Plaice, Sam Street, and Bastian Lehmann only has an 8% market share in the US food delivery market according to data provider Second Data.
In its last funding round in September 2019, Postmates was valued at $2.4bn . While Postmates was founded three years before Uber Eats, it failed to capitalize on its early mover advantage. Hollywood celebrities like Kylie Jenner and the singer John Legend endorsed Postmates while actor Jared Leto is among its investors.