Uber Wants to Buy Grubhub! How much Will Uber Eats pay?!
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Uber is in talk to buy out Grubhub!!! This would be a massive deal in the stock market as the deal would be for more than 5 billion. Uber eats and Grubhub together would be the biggest player in food delivery.
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Well, guys, we have some big news in the stock market world here today I’m looking at grubhub, stock up 36%. On a day when the market is down, looking at Uber stock up five and a half percent today, I’m looking at these numbers this morning.
I’m like, What in the world is going on with grubhub and Uber today? Those are really big moves, obviously, especially the grubhub move right? on a day when the markets down, like what the heck is going on.
And then I started thinking, Oh, you know what, what the stock market is probably just a normal day like this is probably just another day normal day in the market. And if you look at these stocks, they opened pretty normally today.
And then all of a sudden read about when that when the market had been open about an hour and a half grubhub goes a crazy, it would have been very good to buy grubhub socket, read about 7:59am on the east coast.
Let’s put it that way. Because that stock just shot up like crazy. And you look at Uber stock, the same exact thing happened with Uber stock. There was something happened here some big huge news, and it sent these stocks up massive.
Okay. And the big news is Uber approaches grubhub with take over offer. Wow, there’s been some talk for some time about maybe Uber would try to buy out somebody in the food delivery space.
And it looks like it’s gonna be grub hub, Uber technologies has made an offer to acquire grub hub in a move that would build out its food delivery platform, even as a shudders parts of its own service abroad, which is some smaller markets.
Okay, according to people familiar with the matter, the companies are in talks about a deal and could reach an agreement as soon as this month soon as this month keep in mind today’s already what may 12 or something like that.
So that would be rough soon said the people who asked to not be identified because the matter isn’t public deliberations are ongoing in talks could still fall through the people said obviously, when you’re in talks to do any type of deal it could potentially fall through.
But when you when this stuff, you know, starts to get public like this. And you know, there are a lot of times these deals end up actually going through a spokesman for Uber declined to comment grubhub said in a statement, quote, 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 in recent initiatives to support restaurants in this challenging environment.
Obviously, they’re going to say, you know, if the deal because obviously, what if the deal doesn’t go through, they don’t want to be in a position where like, oh, that we’re just counting on that they still want to be confident, you know, put confidence out there in their abilities to compete as a public company.
Okay. So now with that being said, we have some big questions to answer. Okay. One is how much would Uber have to pay for grub hub? What would this deal likely go through as for Uber to essentially acquire grub hub?
The second thing we got to answer is, how likely is it that this deal actually goes through? You know, it’s one thing for two companies talk with the government allow this deal to go through?
Could Uber actually pay for this company? Like, how likely is this to go through? The third thing we got to talk about? Is the deal smart? Is this a smart deal. And I want to give my opinion on that somebody that as you guys probably know, I’m an Uber shareholder, right, and the public count, for instance.
I hold 1000 Uber shares and we’re doing pretty decent. As of right now, we’re about $5,500 on it, about 20%. So we’re doing decent, and this is a company I believe quite a bit in in the future.
So I want to kind of get my perspective. So hope you guys enjoyed today’s video, as always smash the thumbs up and also make sure you guys check out any free resources we have linked down in the description, you definitely gonna want to check out that description area down there.
Okay, so first question up here, how much would Uber have to pay so grubhub as of today, and this is after the massive stock price gain for grubhub, which is like a 35% move, the market capitalization is somewhere around roughly 5.8 billion.
In my personal opinion, and I’ve you know, been part of many takeover deals before where it’s either one of my companies got acquired by a private equity company, or whether it’s one of my companies actually bought out another company.
You know, I kind of have an idea of the valuation, and in my opinion, will probably be somewhere between a $5.5 billion valuation and a $6.5 billion valuation. I don’t think grub hubs selling out for anything under 5.5 billion.
I think that would be their bare minimum price. Okay. And keep in mind what the stock price is done today, it’s kind of irrelevant to the deal. So just that’s something to kind of keep in mind.
So in my opinion, the lowest number grubhub would take would be about 5.5 billion, I think the most Uber would offer would be about 6.5 billion. So look for the number to be somewhere in there roughly.
And just know if the number has a six in front of it likely grubhub had a little better negotiations and if the number has a five in front of it, then Uber had a little better negotiations there.
So look for the deal to be somewhere roughly in there. Now if we look at grubhub the business has grown quite substantially right $683 million. This company does in total revenue in 2017.
This past year over one Point $3 billion, okay, we’re talking about almost a double up in revenue in a matter of a couple years. That’s very impressive, gross profit. Also pretty impressive, not as impressive but still pretty decent, right?
2017 357 million in gross profit in this past year 521 million, where it gets not so good as you go ahead and look at net income, right $98 million of positive net income back in 2017. And then they lose money on the bottom line this past year.
But something to keep in mind is the space has been incredibly competitive the last year, these companies are fighting over market share, we’re talking about doordash, we’re talking about post mates, we’re talking about Uber Eats.
And we’re talking about grubhub, those four companies specifically, and you got some smaller players as well. But those are the four main players. And they have been just going at it left and right, it’s killed margins, it’s killed profitability.
And when you have that type of competitive landscape, it’s really bad if you’re competing there. Because you know, it’s just a lot of cuts. And it’s just, you know, it’s hard to make profits. In the end in a scenario like that.
No grub hub has $425 million in cash on their balance sheet as of December 31. So meaning, essentially, you know, that that’s money that Uber gets, you know, whatever’s on the balance sheet, Ubers getting it.
So essentially imagine, you know, this company has, you know, let’s say a half a billion dollars around in cash, and maybe investments or something like that short term paper, something like that, that essentially takes that’s like a $500 million discount to Uber for buying the company out essentially.
Okay, and nevermind that you get all the other assets as well. Now, what we’re looking at here is very important, okay, this is a share of sales in the United States of America, for food delivery platforms, okay.
And this is a, you know, March was the latest month, we grabbed that a fork. So essentially, Uber Eats had somewhere roughly around 20% of the market share the number i think is actually a little higher than that, but because the way Uber kind of accounts for some different things, the numbers isn’t fully reflected there.
So you know, we’re gonna say it’s at least 20% market share for Uber Eats. And then grub hub has 28% market share. So you combine those players together, and you’re basically talking about roughly 50% of market share, if not a little more than 50% of the market share Uber Eats actually reported properly.
So immediately, you become the biggest player in the United States of America, and likely worldwide once that company is acquired. And we know Uber loves to be what they love to be number one, you know, you think about the rideshare business, right?
There’s two players in rideshare, in the United States of America, in North America, in general, right, there’s Uber and there’s left and who is the main big player, there it is Uber, Uber loves to be in that prime position.
They’re the biggest they’re gonna you know, be get the biggest benefits, they’re gonna control the market, they’re gonna, you know, push prices around and things like that. And Uber, that ultimately is going to end up getting there.
If they buy out grubhub they’ll end up having, you know, the biggest market share out of anybody in that market. When you look at the only other major major player is doordash. Right? Postmates is somewhat of a player but 9% market share, need the same Postmates is kind of the lonely child left out there.
There will be an Uber and doordash game at that point. Okay. Now something else I think is interesting. Uber doesn’t want to just acquire them to become the biggest player, but you look at some of the markets where grub hubs really strong.
Uber Eats has really weakened some of those markets and vice versa. Some of these markets Uber Eats is incredibly strong and grub hubs really weak look in New York City for instance, that’s one of the biggest markets out there for food delivery, right. New York City grubhub has a 62% market share incredible rate, while Uber Eats only has 17%.
You go down to Miami, another massive market for food delivery right? grub hub only has 9% market share in Miami extremely low. Meanwhile, Uber Eats has 56% look at Philadelphia grubhub has about 39% market share massive while Uber Eats only has 14% look at Atlanta grub hub has only 13% market share, while Uber Eats has 38% market share.
So when you look at this, you can clearly see that some of these markets, grub hubs are incredibly strong. And some of these Uber Eats is really strong. And it you know, a deal like this kind of, you know, makes sense for the most part.
Okay. Number two, how likely is this deal to go through? So if we look at the balance sheet of Uber, could they financially post off? Absolutely. Uber has over $11 billion dollars in cash as of their latest quarter in equity and other investments of 11 plus billion.
So Uber could easily financially pull this deal off, and it’s not even hard. Uber could do it do the deal. All cash if they want to remember that say they have to buy enough for 6 billion or something. They could buy him out all cash tomorrow.
They could also do all credit, which you know, essentially, you know, take out debt. Uber has no trouble like tapping the capital markets, like you know, any bank out there would easily loan Uber the money to essentially acquire this deal.
I don’t think they’d want to do it on all debt. In my opinion, they’re actually going to do probably a combo, I can see them doing something like $2 billion in cash and maybe $4 billion in debt or something like that, or maybe 3 billion 3 billion, or they could even do thing I’d even put up here.
You could essentially give some equity to grubhub shareholders, which is also a possibility, like give them Uber shares, you know, to basically account for whatever they acquired. And I’ve seen definitely some deals go through in the past that that go that route where they essentially give equity in the company.
It does dilute shareholder value to a certain extent. But it does allow you not to take out debt. And it does allow you to essentially keep your cash around. We’ll see what happens, in my opinion, like I said, I think it will be a combo of a cash deal with some debt out there.
Now, before I give you guys my opinion on this deal, I know another question would be would the government allow this deal? Whenever you’re talking about a takeover like this, the government always has to play with the US government allow this? I think they would.
There’s so much competition in the food delivery space. I don’t think this would be something like, you know, let’s say Verizon and at&t wanted to get together someday, I think government’s not going to allow that that’s just like too much a monopoly on a needs based industry, food delivery, so much competition in that space in the way.
I think the government would view it. I think this deal could definitely definitely, you know, go through especially because both these companies are public companies and that have taken losses to this.
Also keep that in mind. It’s not like these are super profitable companies that are you know, they combined them and it’s like, Whoa, look at all the money they’re making. It’s not that way as of right now.
So I think the US government would allow it. Okay, now, do I think this deal is smart. I love it. Okay. I absolutely love this as an Uber shareholder. I would definitely, you know, vote for this deal to go through.
Okay. food delivery is red hot right now. We know that right? I mean, restaurants around the country have been closed for last couple months. And we know that even as the the the dining restaurants start to open.
A lot of people are definitely going to be very wary of going out and going to these restaurants, people have gotten a lot more familiar with just the fact that if they want food that’s out to eat, just order it on a food delivery platform.
And the numbers that Uber Eats is putting up right now. Off The Charts like 50% plus growth right now. Like it’s incredible in every food delivery platform right now is growing like like, you know, this whole Roni Roni situation, it’s been bad for a lot of things.
But for food delivery, it has been the best thing you could ever possibly ask for food delivery specifically. Okay, so food delivery is super hot. This trend is not ending in my opinion. It’s not like all sudden, when Roni Roni gets over.
Everybody’s like, No, I don’t want to order on food delivery anymore. Like this is something once you start doing it, you keep doing it. So food delivery is it’s a trend that will play out for decades to go in the future.
Okay, you’ve had a ton of people sign up in NBA basically become new customers of grub hub of doordash of Uber Eats, like just a lot of customers that have never even thought about getting food delivery from one of these apps before that have now started doing it.
Because of Roni, Rona, you have a former customer so that I don’t want to call them former customers, but customers that were already your customer, like I already had Uber Eats installed, I would order from Uber Eats maybe like once a month.
Now I’m doing it like once or twice a week. And that kind of becomes a habit, it reminds me of like, when I first started using Amazon, I think I became an amazon customer, I think around 2010.
Back in those days, I would order from Amazon maybe once a month, maybe once every two months, right? versus all sudden, you know, five years go on, maybe we’re in, you know, 2015 I’m starting to order from from Amazon every, let’s say two weeks.
And nowadays, I order from Amazon, you know, sometimes several times a week, those prime hands are in front of my house. Okay. So essentially you you become more of a habit you get in that that, you know.
I’m just used to using this, this is what I use, I order from it, I order from it and you keep replenishing right? and restaurants this has been this is another big factor that people aren’t even accounting for.
The fact is there was tons of restaurants, tons of fast food players that refused to go on Uber Eats or a lot of these different food delivery platforms, because they looked at it as well.
We don’t want to give them a kind of thing. What do we have to raise our prices that can damage our sales and things like that? And what every single fast food joint every single restaurant that’s gone on these platforms is realizes this is a massive opportunity.
Why weren’t we doing this before, but a lot of them were hesitant. They were like, well, is food gonna still get their hot? We’re gonna get customer complaints. How do we handle that there was all those thoughts in this whole Roni.
Rona situation has forced every single one of these companies to say don’t worry about that get on the platforms and watch the sales pour in. And that has happened for pretty much every single player out there in the restaurants weren’t going back from this.
This is like a stimulus for the restaurants. Okay, getting on these food delivery platforms. If you think all of a sudden, you know, chick fil a is also gonna be like, No, we don’t want to do you know, food delivery on these platforms anywhere more like that’s not going to happen because they’re seeing their sales go way, way up.
And that goes for every single fast food place and every single restaurant out there. The fact is, once you get used to that, and you get to use that money coming in, you’re like, I don’t want to get off of Uber Eats and doordash and Postmates or all these platforms that are or do I want to stay on and keep having that extra 10% 20% 30% bump to my business.
You’re probably gonna stay on right so the fact is restaurants aren’t going back on this and that’s phenomenal news for Uber Eats and everybody in the space okay. They would become the biggest player and like I said, you know, with Uber.
They want to become the biggest player you then become the controller of The market you then can dictate, you know how much money is made out there if you want to be super promotional and things like that, and the other players kind of just they got to go with it.
And I think when you become the biggest player, the chances of profitability go up immensely. Okay. doordash and Uber would control the entire market, especially in the United States. I mean, we’d be looking at probably at you know, 5% plus on market share.
If not 90% of the market share but control between two companies that is much more healthy for the delivery market, let’s put it that way. The chance out, you know, competition then goes out the window because then you go from three major competitors competing like crazy and you can you know, if you want to throw Postmates in there.
You it’s really for Tulsa, now you go down to two real competitors out there. And don’t be surprised if this deal goes through. Don’t be surprised if doordash ends up acquiring Postmates something to keep in mind though, that’s not a for sure thing.
But you know, if this deal goes through doordash post mates are going to have to look at this as we got to combine or you know, Postmates might go out. And you know, I think doordash would like to just acquire post mates.
So once a competition gets out profits pour it another reason, by the way, doordash would likely have tried to acquire post mates if this deal goes through because then doordash is going to be very scared that what if Uber buys post mates as well, then they get even more market share.
So you know, that’s the whole thing. So competition goes out this cutthroat you know what’s going on in the food delivery space it ends and what ends up happening, profits pour in. And by the way, before this Brony run a situation Ubers rideshare business was starting to look extremely profitable.
It’s a shame that the Rooney runner had to come and mess up the rideshare business right now. But that will get back on track over time and that will become a profit beast because there’s just lack of competition in that market there just is like you look around the world.
There’s usually only one or two competitors in pretty much every market as with the United States you want to ride somewhere Uber Lyft most people are taking an Uber okay profits report and I love this deal I hope it goes through you know i would love something with a five in front of it for the deal to go through that would be ideal.
But even if as a six I would still vote for it. So I hope you guys enjoyed today’s video as always, let me know your opinion that comment section smash a thumbs up if you enjoyed today’s video. Thank you for watching. Have a great day. Don’t forget to check out the free resources in the description.