Serious sticking points remain, beyond price
Uber Technologies Inc. and Grubhub Inc. continued their merger discussions over the weekend, with the companies’ chief executives trying to hash out the price of a deal that would reshape the meal-delivery business.
Grubhub Chief Executive Matt Maloney spoke to Uber Chief Dara Khosrowshahi Sunday and indicated that Uber’s latest offer of 1.9 of its shares for each Grubhub share is too low, according to people familiar with the matter. Khosrowshahi said he might be able increase the offer to 1.925 Uber shares, but that is still well below the price Grubhub had been seeking.
There is no guarantee the companies will manage to reach agreement on a price, and once they do there are still other items to be negotiated for a deal that would combine Grubhub GRUB, +0.45% with Uber’s UBER, -0.97% food-delivery unit, Uber Eats. An agreement — should there be one — is still unlikely in the next few days, the people said.
The gap between what each side is seeking is a sign of the challenges they face in cementing a deal that would establish a larger competitor in the cutthroat industry and potentially yield hundreds of millions in cost savings. The companies have estimated cost savings would top $300 million, but Morgan Stanley analyst Brian Nowak estimated in a note Wednesday that the figure could be more than twice that, mainly due to decreased sales-and-marketing and delivery costs for Grubhub.
Even if the companies are able to settle on a mutually agreeable price and other terms, regulators would still need to sign off on a transaction at time when a number of politicians have signaled opposition to this combination and mergers in general while the coronavirus pandemic has hobbled the economy and thrown tens of millions out of work.