To no one’s surprise, Uber announced today that it would spend $2.65 billion to acquire fourth-ranked restaurant food delivery service Postmates. For that, they gain probably 8 to 10 million active users at a $330 per user valuation.
To us, that the deal is an all-stock exchange suggests desperation on the part of Postmates. The company had raised just north of $900 million. So even if it were all-cash it would still be an underwhelming exit. A stock deal? Ugh.
Uber Chief Executive Dara Khosrowshahi said the deal would enable it to expand it’s delivery options to everything from “groceries to personal care and fashion items”. That seems a lot like where others in the space are aiming. Think Instacart. Interestingly back in 2018, Instacart and Postmates had partnered as of means of managing the peaks and valleys of the delivery business. Now Instacart and others will have another large scale competitor to contend with in Uber.
Last Mile War Still Rages
As we wrote last week, the battle for the last mile to the home will continue to heat up. What’s the next transaction in the last mile sweepstakes? Amazon reentering the food delivery space? We’ve heard nothing from Uber competitor Lyft regarding its need or desire to expand its logistics platform. FedEx and UPS have plenty of rolling stock and logistics know-how.
And then, of course, there’s the question of what the last mile sweepstakes looks like in a post-pandemic era. Will the delivery model be as important as it is today? Will valuations hold up in a post-pandemic era?
As Uber’s CEO said, “The vision for us is to become an everyday service.” Frankly, who can afford not to be going forward? The market is certainly large enough to support two to three large players with multiple niche competitors operating successfully as well. Who will be those two to three major players? Time will tell, but the pieces are certainly coming together.