Uber Technologies Inc. (UBER) has reportedly made an offer to buy Postmates, the upstart delivery service, in a deal valued at about $2.6 billion as the on-demand food delivery market consolidates.
The two companies could reach a deal as early as Monday evening, The New York Times reported citing three people familiar with the matter, who spoke on the condition of anonymity because they were not authorized to do so publicly. The talks are still going on, the people cautioned, and any potential for a deal could fall apart, the report said.
A takeover could bolster Uber’s delivery business, Uber Eats, and help it compensate for the curtailed demand of its core ride-hailing business, which has collapsed in many cities because of the coronavirus pandemic. Shares in Uber have doubled since March as food delivery demand has soared while restaurants are closed and people are staying at home.
Postmates created in 2011 also reportedly held sale talks with larger food-delivery rivals DoorDash and GrubHub Inc. (GRUB) over the last year.
The reported offer comes after Uber’s merger talks with GurbHub fell through earlier this year. Instead, Netherlands-based Just Eat Takeaway.com this month snapped up GrubHub in an all-stock deal valued at $7.3 billion.
Uber shares closed little changed on Monday trading at $29.63.
Five-star Jake Fuller at BTIG says that while a tie-up with Postmates might not provide the same impact as a GrubHub acquisition, it would nevertheless “remove a competitor, boost scale and unlock synergy.” Fuller estimates that a takeover could result “in EBITDA potentially in the $100-160 million range.”
The analyst maintains a Buy rating on the stock with a $47 price target (reflecting 59% upside potential).
The rest of the Street shares Fuller’s bullish rating outlook. The Strong Buy consensus boasts 26 Buys versus 3 Holds and 1 Sell. Despite the recent rally, the $41.01 average price target implies shares have room to rise another 38% in the coming 12 months. (See Uber’s stock analysis on TipRanks).