Although Grubhub is in takeover negotiations with Uber, the smaller firm has reportedly received merger offers from two European food-hailing providers. CNBC states Germany’s Delivery Hero and Netherlands-based Just Eat Takeaway have expressed interest in acquiring the Chicago-headquartered meal transportation service.
Bloomberg reports Grubhub’s talks with its new suitors are not as advanced as its discussions with Uber, but a contractual impasse between the two may prompt a transatlantic tie-up.
Why European Food-Hailing Companies Want Grubhub
Delivery Hero and Just Eat Takeaway are interested in Grubhub for the same reason Uber is; they want its share of the United States food-hailing market.
Since the coronavirus pandemic began, most U.S. online meal delivery services have experienced significant surges in activity. Uber saw its food orders jump by 70 percent because of COVID-19, while market leader DoorDash grew its business by almost 20 percent. However, despite maintaining a 28 percent share of the American market, Grubhub’s business dropped significantly in March.
As opposed to its Silicon Valley peers, the Illinois meal transportation service saw its revenue dip because many of its users ordered from their offices. Also, Grubhub suffered when New York, its largest market, issued lockdown orders that shuttered restaurants and prompted temporary resident relocations.
Already grappling with its own COVID-19 related headwinds, Uber likely saw Grubhub’s struggles as a golden market consolidation opportunity. As TechCrunch pointed out, the ride-hailing corporation could potentially increase its underwhelming food transportation net income.
Simultaneously, Delivery Hero and Just Eat Takeaway probably viewed a Grubhub merger as a bridge into a new region. While both firms operate in the United Kingdom, Australia, and South America, they lack a presence in the U.S.
Why Uber and Grubhub Have Yet to Make a Deal
Even though Uber and Grubhub have been negotiating for several months, they have not yet closed a deal. Obstinately, the two services’ inability to agree on terms is perplexing given the online taxi company’s faltering core business and the meal ordering firm’s earnings difficulties. Bloomberg recently revealed the hang-up is due to a disagreement regarding a potential reverse breakup fee.
Often, corporate buyers will require a seller to agree to pay a breakup fee if their deal goes south under certain specific conditions.
The publication notes Grubhub asked Uber to commit to making a cash payment if U.S. regulators reject their proposed merger. However, the ridesharing company is reluctant to do so because of the size of its acquisition offer. The two firms reportedly neared finalizing a purchase price before the reverse breakup fee issue came to the fore.
At this point, Uber could still announce plans to buy Grubhub if the two parties can work things out. However, the food ordering brand might be better off selling itself to Delivery Hero or Just Eat Takeaway. For one thing, the firm merging with either European company could ease American lawmakers’ antitrust concerns. Besides, the corporation might be able to secure more favorable terms with its foreign suitors given their lack of familiarity with its domestic market.
Regardless, it is looking increasingly like the coronavirus pandemic will irrevocably change the U.S. food delivery market.