The hottest deal in tech isn't happening after all: Uber's acquisition talks with Grubhub have collapsed, and Grubhub instead will merge with European giant Just Eat Takeaway.com.
The Uber deal was reportedly nixed due to antitrust concerns, which shadowed the courtship since it was revealed publicly. Rep. David Cicilline, the top Democrat on the House Judiciary's antitrust subcommittee, called the potential deal "a new low in pandemic profiteering," while a group of Democratic senators asked the FTC and Department of Justice to look into the acquisition, which they claimed would "raise serious competition issues." Based on a Wedbush analysis, a combined Grubhub and Uber Eats would have controlled around 55% of the U.S. restaurant delivery market.
Amid this political uncertainty, Grubhub reportedly wanted Uber to agree to a cash breakup fee, to be paid in the event that the deal didn't go through. Uber was seemingly reluctant to commit — and has now bailed altogether.
Fortunately for the struggling Grubhub, an overseas savior emerged. Grubhub and Just Eat Takeaway.com (which we'll call JET) announced Wednesday that they'll merge in an all-stock deal. JET is itself the product of a merger, with the Dutch Takeaway.com acquiring Britain's Just Eat this year for around $7.4 billion.
Grubhub, which is worth around $5 billion, will finally give the European firm a foothold in the U.S., delivery's second-biggest market. JET's lack of a U.S. presence up to now also means that the deal is unlikely to run afoul of U.S. regulators, who don't have to worry about decreased competition in the American market.
That's not the only reason this deal makes sense. Like Grubhub, JET's primary focus is a marketplace-based model, one that pairs consumers with restaurants that handle their own delivery. Uber Eats, meanwhile, pays its own drivers — a business that Grubhub executives famously said would never "generate significant profits," but were forced to enter in the face of competition from DoorDash, Postmates and Uber Eats.
Should the merger go through, then, a crucial question will be whether Grubhub continues to do its own deliveries (something that JET has also experimented with) or if it retreats to its once-successful marketplace-only model.
Grubhub could also benefit from having an owner that is singularly dedicated to delivering food and one that's been in the game for a long time. Both Just Eat and Takeaway.com were founded in 2000, before Grubhub's 2004 founding and significantly earlier than Uber Eats' 2014 launch.
For Uber, the loss of the deal is a mixed bag. Uber wanted to expand Eats' market share, helping to boost its least-unprofitable segment — and may now struggle to do so. But there could be a silver lining. With Uber under significant financial and regulatory pressures, a complex merger might not have been the best idea right now. Without Grubhub to distract it, Uber can focus on its core business of moving people.
This post was updated with more information about the Just Eat Takeaway.com merger.