: The pandemic turned Postmates' IPO plans right into a bidding battle between Uber and Wall Avenue

Postmates bought by Uber have not made a profit since their inception.

Justin Sullivan / Getty Images

On March 17th, the day the San Francisco Bay Area became the first major metropolitan area to implement a protection policy due to the COVID-19 pandemic, Postmates Inc. hired a bank to either go public or make an acquisition.

As the pandemic spread, Postmates' sales doubled, and eventually a month-long bid war broke out between Uber Technologies Inc., blank check companies, and the IPO market. That was revealed in an Uber filing with the Securities and Exchange Commission that was released on Friday. About
+ 3.32%
In early July, he finally won the tender with an all-stock deal valued at $ 2.65 billion Postmates, roughly 40% more than Uber's first bid for its gig last summer. Economy unicorn from San Francisco.

Two undisclosed special purpose acquisition companies (SPACs) offered valuations in excess of $ 2 billion, but after Uber negotiated with GrubHub Inc.
+ 0.26%
In early June, Postmates and advisor JP Morgan fell apart and went two avenues to negotiate a deal with Uber and prepare for an IPO. When COVID-19 straightened its head in the southern United States in late June, creating new worries for Wall Street, Uber and Postmates got serious and worked out the deal.

Uber's 388-page SEC filing gave a public glimpse into Postmates' financial performance, showing that the delivery service doubled its sales but continued to lose money amid the pandemic. Postmates was founded in 2011 but never made a profit and lost a total of $ 929.3 million in late June. The company, whose couriers deliver ready-made meals and more, had revenue of $ 160 million for the quarter ended June 30, more than double the $ 71.4 million for the year-ago quarter.

The additional revenue and significant reductions in sales and marketing in the three months before Uber announced the acquisition in early July meant Postmates lost $ 32 million, nearly a quarter of its loss of $ 116 million last year Year. Uber more than doubled its delivery business on a much larger scale in the second quarter to $ 1.21 billion, which is more than seven times Postmates' sales. Uber reported an adjusted Ebitda loss of more than $ 230 million for Uber Eats in the quarter, due to why delivery is still being questioned as a profitable business model.

If the deal goes through, the combined company would move to DoorDash, the leading grocery delivery app provider, and its 45% share of the market, according to Edison Trends, which has a combined Uber and Postmates market share of 37% USA win. GrubHub, which was eventually bought by Just Eat Takeaway

would be the third.

As of June 30, Postmates had approximately 12.6 million active customers (those who had placed orders in the past 12 months, especially more than the 10 million reported at the time the acquisition was announced in July) and more than 550,000 delivery agents showed filing by contractors. Those numbers were encouraging to Wedbush Securities analyst Dan Ives.

"The growth rates and metrics show an underlying strength that is better than the now-closed streets expected," Ives said Friday, adding that the numbers should give Uber investors a better feel for the acquisition. "We believe this asset could help Uber accelerate its food delivery journey to profitability by 6 to 12 months."

Uber's purchase of Postmates has yet to be approved by Postmates shareholders and US regulators. The companies announced in Friday's document that they had made two requests for additional information to the Justice Department by 9 September at the latest.

Under the Uber-Postmates Agreement, Uber agreed to borrow Postmates up to $ 100 million in operating costs for the next 12 months. If the deal doesn't go through, Uber agreed to pay a processing fee of $ 145.8 million, minus the amount already borrowed with interest.

See: Uber's delivery business outperforms core business as pandemic rocks revenue

According to the filing, Uber and Postmates pulled out of talks on a possible merger in July 2019, with Uber making a preliminary offer for a valuation of $ 1.9 billion. Postmates received two special-purpose offers from acquisition companies in early June, one valued at $ 2.3 billion and one valued at $ 2.5 billion.

Uber stocks ended the day 3.3% higher at $ 34.46 and fell less than 0.5% after close of trading on Friday.

Related Articles