How Uber hailed a deal with Grubhub only to let it slip
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[June 11, 2020] By
Krystal Hu and Greg Roumeliotis
NEW YORK (Reuters) - Uber Technologies Inc
<UBER.N> CEO Dara Khosrowshahi has spent much of his career deftly
negotiating acquisitions. Yet his $6.5 billion all-stock bid for Grubhub
Inc <GRUB.N> ended with the food delivery company being acquired by
European rival Just Eat Takeway.com NV <TKWY.AS>.
A former Allen & Co investment banker, Khosrowshahi courted Grubhub for
more than a year, and agreed a price in principle last month for an
acquisition that would have boosted its Uber Eats division and given it
an edge over rival Doordash, according to people familiar with the
discussions.
Khosrowshahi and Grubhub's founder and CEO Matt Maloney had settled on a
stock exchange ratio of 1.925 shares of Uber for each share of Grubhub,
the sources said.
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Left unresolved was a plan to get the deal approved by regulators, the
sources added. Uber and Grubhub combined would account for more than
half the U.S. food delivery market, according to some analysts'
estimates. The deal would almost certainly draw scrutiny from antitrust
officials and politicians wary of big mergers that could lead to job
cuts, as the economy reels from the COVID-19 pandemic's fallout.
That is when the negotiations stumbled. Uber refused to commit in
advance to specific concessions it would make to regulators and
politicians to see the deal through, according to sources close to
Grubhub. From Uber's perspective, it was Grubhub that refused to address
practices that could become issues in a regulatory review, such as its
charges to restaurants and the "cybersquatting" of internet domains,
according to sources close to the ride-hailing giant.
The two companies could also not agree on the breakup fee that Uber
would pay Grubhub were regulators to shoot down the deal, sources close
to both companies said.
Other issues came up as well. Maloney wanted to head Uber's new food
delivery division, a role Khosrowshahi intended for Uber Eats chief
Pierre-Dimitri Gore-Coty, a source close to Uber said.
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![](../images/061120pics/busine49.jpg)
The Uber logo is displayed on a mobile phone in this picture
illustration taken November 25, 2019. REUTERS/Hannah
McKay/Illustration
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Just Eat Takeway.com seized on the impasse. After media reports of the talks
between Uber and Grubhub surfaced last month, its founder and CEO Jitse Groen
approached with his own all-stock offer, the sources said. Uber, believed to be
Grubhub's sole suitor, was taken by surprise, the sources said.
With a market capitalization of $60 billion, Uber was well positioned to outbid
Just Eat Takeway.com, which has a market capitalization of $15 billion.
Yet Khosrowshahi, who previously led online travel agency Expedia Group Inc <EXPE.O>
and built it up through a string of dealmaking, decided that Grubhub was one
acquisition he should let go, even if this created a stronger competitor. He
viewed Grubhub as unresponsive to Uber's efforts to hammer out a roadmap for
getting the deal approved by regulators, two of the sources said.
In an Uber board meeting on Wednesday, Khosrowshahi agreed that the company
should drop its pursuit. Just Eat Takeway.com inked a $7.3 billion deal with
Grubhub later that day. Uber is not planning to come back with a new offer, the
sources said.
"Like ridesharing, the food delivery industry will need consolidation in order
to reach its full potential for consumers and restaurants. That doesn't mean we
are interested in doing any deal, at any price, with any player," Uber said in a
statement.
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Grubhub and Just Eat Takeway.com did not immediately respond to requests for
comment.
(Editing by Jacqueline Wong)
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