Uber buys Postmates, ups delivery game in $2.65 billion deal

FILE - In this May 15, 2020 file photo, an Uber sign is displayed inside a car in Chicago. Uber finally got its food delivery company, acquiring Postmates in a $2.65 billion all-stock deal, the ride-hailing giant confirmed Monday, July 6.  (AP Photo/Nam Y. Huh, File)
FILE - In this May 15, 2020 file photo, an Uber sign is displayed inside a car in Chicago. Uber finally got its food delivery company, acquiring Postmates in a $2.65 billion all-stock deal, the ride-hailing giant confirmed Monday, July 6. (AP Photo/Nam Y. Huh, File) (Copyright 2020 The Associated Press. All rights reserved.)

SILVER SPRING, Md. – Uber has widened its reach in the fiercely competitive delivery market by acquiring Postmates in a $2.65 billion all-stock deal, the company said Monday.

The acquisition enables the ride-hailing giant to increase its delivery offerings at a time when the global pandemic has suppressed customers' desire for rides while boosting home delivery needs. While Uber's meal delivery business, Uber Eats, has mostly focused on restaurants, Postmates delivers a wider array of goods including groceries, pharmacy items, alcoholic drinks and party supplies.

“The vision for us is to become an everyday service,” said Dara Khosrowshahi, CEO of Uber, in a conference call with investors Monday. “Postmates is a great step along that vision. Anyplace you want to go, anything you want delivered to your home, Uber is going to be there with you, and we think these everyday frequent interactions create a habit, create a connection with customers.

Uber and its Uber Eats food-delivery division will gain ground against DoorDash, which controls about 44% of the U.S. meal delivery market. That's compared with Uber Eats' 23% share before the Postmates deal. Grubhub and its subsidiaries had just under 23% of the U.S. meal delivery market, according to May figures from Second Measure, a data analysis company. Postmates had about 8% of the market.

“We really believe that the market is much bigger than, let’s say, the traditional delivery players,” Khosrowshahi said. “We look at groceries as a category, there’s a lot of hot food being delivered, we look at essentials as a category that we are going to go after as well.”

Last month, Uber lost out in a bid for Grubhub, which would have made it the dominant U.S. food delivery service. But Amsterdam-based Just Eat Takeaway.com ended up nabbing Chicago's Grubhub in a $7.3 billion deal. Uber was reportedly seeking to team Grubhub with its Uber Eats business.

The food delivery sector is undergoing a major consolidation this year and more is expected. The number of people using food delivery services is on the rise because of the coronavirus pandemic, but customers tend to jump around from service to service depending on where they can find the best deal.

Some restaurants are already leaving the platforms, saying the commissions — which can top 30% — are too high.