Uber is discussing a takeover deal with Grubhub
Uber. Making a bid for GRUB and shares of GRUB hub ended on Tuesday up nearly thirty percent down a little bit today but these conversations are ongoing before we get into the particulars. What what was your reaction when you saw that because mine was there are some acquisitions that in the moment you look at them and you think to yourself. Well that makes perfect sense for me. This isn't one of them. But what do you think? Well I don't know if it's something I would say makes perfect sense but I do see the connection there. I mean I certainly see why Uber would be thinking in this direction in and I think that for rub this this could be. Maybe the best way out. I mean the economics food delivery a really tough we've certainly seen that in grubs margins and financial since it's been a publicly traded company and in unfortunately it's not a market that really rewards exclusive relationships. I mean people are just looking to get their food from point. A. Point B. in restaurants. WanNa be able to do that and make sure they can rely on the partners that are delivering that food. So for me like I as I said this is not a market that rewards exclusive relationship so we saw for example when shake shack. Release their earnings here last week. They had exited an exclusive relationship. With GRUB HUB in. We're utilizing more partners. Uber eats be one of those from the restaurants perspective. You know they want to try and bring as many of those partners as they can as they can but it is it is it is. It is a market where you're certainly seeing consolidation. Almost needs to happen because otherwise it's going. It's going to be really difficult for a lot of players to be successful in space. You could see where maybe a couple of players could be successful successful in this space in. I think that with with Uber. We've always asked the question. How ARE THEY GONNA? Levers that network beyond just you know shuttling. People around in Uber eats is definitely one of the ways to do that. Uber eats is certainly performing pretty. Well I mean in in quarter one. They generated four point. Seven billion dollars in gross bookings that was up. Fifty fifty four percent from a year ago in revenues accelerating in that line of work take rates are accelerating as well so. I mean. They're seeing a lot of success for obvious reasons right now. I mean folks are are looking to have more food delivered But but I think with with GRUB HUB. This might just represent the best opportunity for the business and for shareholders because otherwise. They're going to be stuck in this perpetual battle for very very incremental prophets. Right I mean it. It is just not a super high margin business and you know for restaurants they delivery now more than ever So I think I think that will probably continue on for some time. But it's definitely a space where consolidation is starting to happen in. I actually could see grub hub in Uber getting together there in creating really a massive food delivery network that even really extends beyond restaurants right. I mean Breezes Inc Grocery for example they have I think what four thousand parts and thirty five countries with with Comey's car for for example at Cisco I mean they're leveraging that network in good ways and I think this is a sign of things that could a sign of things to come for Uber? That could be good. I mean it's obviously still hemorrhaging cash. And they're gonNA raise some more debt. It sounds like but if this is a deal that happens. It sounds like it'd be an all stock deal another kind of hemming and over the valuation. But I wouldn't be surprised to see this happen. It's funny. You mentioned that talking with our colleague Abby Malan and she's a grow up shareholder and she made it very clear to me. She's not interested in Uber Stock. She was happy to see the spike. In growth hub shares. She would much rather prefer this. Be A cash deal. Because she's not looking for Uber Stock. But it'll be interesting to say to see how the valuation shakes out here because right now with this spike and a little bit of a pullback today grubs valuation is five point three billion. They've said they would sell at evaluation of six point. One billion so that's another fifteen percent upside from. Where is here? It is and you know I mean. These companies will go through negotiations to try to figure out what makes the most sense and that's kind of Nice part about all stock transactions for the come from the company's perspective right. They're essentially just they don't have to dole out physical currency right. I mean shares are currency. But it's not really affecting their pocketbook. Investors are kind of the ones that potentially at screwed there and in. I do feel like Abbie. I agree with that. I'm not really interested in an Uber. Uber's stock today. I mean I think it's a fascinating business to follow. I'm cautiously optimistic. That they will be able to leverage that network overtime in do more things with it. But I think it's GonNa take a while in they clearly. It's GonNa take a long time for them to even achieve any meaningful profitability. So yeah I mean from from the company's perspective that all started you'll makes perfect sense from the investors perspective. Yes I'm a shareholder in this ends up happening then I get you know those. Those Uber Uber shares. For that deal. I probably would look at it going ahead and selling those uber shares and putting that money to work elsewhere. Because any way you put it I mean food deliveries just. It's just a really tough business. I mean we saw not all that long ago we're square on loaded the The caviar side of the business right I mean they. They dipped a toe in that market thinking that might be something complementary to their business. It turned out it really wasn't turns out. It's just really hard work. It wasn't something that lined up or leveraged their existing business to the degree they felt like made sense in so I think yeah I mean this kind of it makes me think a little bit of satellite radio in your head series. Xm and Yeah Sirius Radio and yet XM radio and then they merged to form the one big provider in that space. I mean I ultimately could could honestly see being just like a one or two really big providers in the space but time will tell.