What GrubHub’s $7.3 Billion Sale Means for the Third-Party Delivery Market

In the wake of a negotiation breakdown with Uber, Grubhub announced today that it will officially merge with Just Eat Takeaway, a third-party delivery provider based in Europe, for an estimated $7.3 billion. The blockbuster deal creates the world’s largest online food delivery company outside China.

The deal concludes a rollercoaster few weeks of speculation that began in May with rumors that Uber was in talks to buy Grubhub. The disagreements between the two delivery platforms, including concerns over a break-up fee related to potential antitrust issues, gave Just Eat Takeaway an opportunity to step in with a deal that is less likely to result in significant regulatory actions. It will also represent an implied value of $75.15 for each Grubhub share, for a total equity consideration of $7.3 billion. This is stronger than Uber’s proposition, which would have valued Grubhub at $62.50 per share for a total of about $6 billion. 

“Like ridesharing, the food delivery industry will need consolidation in order to reach its full potential for consumers and restaurants,” Uber said in a statement. “That doesn’t mean we are interested in doing any deal, at any price, with any player.”  

So, what does this historic deal mean for the race to dominate the third-party delivery industry? While this deal will allow a European company to gain a large footprint in the U.S., it likely won’t disrupt the current foodservice market the way consolidating two top U.S. players would have. This comes as good news for many, especially amid COVID-19.

A host of Democratic congressmen co-signed a letter to antitrust officials in May warning them of anticompetitive effects and urging them to monitor the situation closely and investigate an Uber/Grubhub merger if it occurred. 

“I have repeatedly raised concerns and advocated against a potential merger between Uber and GrubHub,” Minnesota Sen. Amy Klobuchar said in a statement. “During this pandemic, when millions are out of work and many small businesses are struggling to stay afloat, our country does not need another merger that could squelch competition. News that the Uber/Grubhub deal may not materialize would be good for both consumers and restaurants.”

With numerous franchise brands shifting to an off-premises only model, third-party delivery providers have had a contentious relationship with restaurant operators amid the pandemic because of fees that sometimes reach 30% to 40%. Several cities have instituted emergency caps, such as San Francisco, Los Angeles, New York City, Seattle, and Washington, D.C.

A combined Grubhub/Just Eat Takeaway will be more diversified and not heavily reliant on the U.S. like DoorDash and Postmates, and will also be able to grow its presence in North America, where Just Eat Takeaway’s subsidiary Skip the Dishes has a strong presence in Canada. Still, Uber Eats will be the new company’s strongest competitor, since it also has a global reach and a strong presence in Europe. 

Just Eat, the result of an $11.1 billion merger between U.K.-based Just Eat and Netherlands-based Takeaway.com earlier in 2020, serves more than 155,000 restaurants across the U.K, Australia and New Zealand, Canada, Denmark, France, Italy, Ireland, Norway, Spain, and Switzerland, and more. Just Eat Takeaway’s acquisition of Grubhub shows that consolidation of the food delivery business could very well be a global process that doesn’t leave U.S. companies off the table. 

Only time will tell if a leading, global third-party delivery provider will emerge and if it will prove to be a good thing for restaurant owners.