In Uber’s apparent Hail Mary bid to buy Grubhub as a measure meant to help its beleaguered business, talks have reportedly stalled over Grubhub’s demand for a breakup fee should the deal fall through.
Citing sources familiar with the matter, Bloomberg reported Friday that Grubhub has asked Uber to agree to a cash payout in the event that U.S. regulators intervene and prevent a merger of the two companies. According to the report, Uber has balked at the request to include a reverse-breakup fee because of what it’s offered as part of the all-stock deal. Neither Grubhub nor Uber immediately returned a request for comment.
Rumors of Uber’s bid to gobble up an Uber Eats rival food delivery service surfaced earlier this month, just as it was reported that the company had laid off 14 percent of its staff. In a memo to employees at the time, Uber CEO Dara Khosrowshahi attributed the cuts to trips “being down significantly” and said the cuts were “one part of a broader exercise to make the difficult adjustment to our cost structure (team size and office footprint) so that it matches the reality of our business (our bookings, revenue and margins).”
That was May 6. Just days later, on May 12, multiple outlets reported that Uber had initiated an offer to buy Grubhub. Grubhub said in a statement at the time that “consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”
Grubhub’s demand isn’t unwarranted. Lawmakers have already asked that the Department of Justice and the Federal Trade Commission “closely monitor the negotiations of this potential transaction and to initiate an investigation if the parties reach an agreement to merge,” citing their combined market domination in many major markets as well as “the leverage that these online delivery companies already wield over restaurants, delivery workers, and consumers, especially during this pandemic.”
“Even after covid-19 is behind us, combining Uber Eats and Grubhub would create an effective duopoly that would likely threaten competition and consumer welfare,” they said. “That could mean higher fees, reduced services quality, fewer choices, and less innovation for consumers and the restaurants that serve them.”
Khosrowshahi defended the potential merger during a recent appearance on the Recode Decode podcast, telling host Kara Swisher that “this delivery of food and essentials to homes is an enormous market, and I don’t see any one or any two having 90 percent of that market. It’s way too big a market.”
Uh-huh, buddy. Whatever helps you sleep at night.