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Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
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Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> confirmed that it is buying Postmates for $2.65bn in an all-stock deal. According to news reports, Uber will run the Postmates app alongside its own Eats business. Uber will also merge some of the technology and delivery operations at the back end; for instance, having the same drivers deliver for both platforms. The deal is yet to go through regulatory approvals. For now, Uber and Postmates have both confirmed the deal. The two companies state that their missions are aligned, which is to use the platform to have anything delivered on-demand; thus, integrating the two businesses will be relatively easy. Moreover, during COVID, Uber Eats platform expanded its product offerings to include daily essentials, groceries and etc. Thus, Uber may be counting on strengthening its Eats business to target a broader market and possibly reduce its losses.Uber is now focusing on strengthening its business in the U.S., after having sold most of its businesses in Asia. Perhaps Uber thinks it is easy to focus on the home market where they already have a significant market share. In Asia, Uber had to compete against local players like Grab, GoJek, and Zomato ( <a href="https://www.smartkarma.com/insights/alibaba-backed-zomato-buys-ubers-eats-business-in-india" target="_blank" data-smartkarma-citation="insights:36019" rel="noopener">Alibaba-Backed Zomato Buys Ubers’ Eats Business in India</a>). There were also rumours that Uber wanted to acquire <a href="https://www.smartkarma.com/entities/grubhub-inc" target="_blank" data-smartkarma-citation="entities:5881:1" rel="noopener">Grubhub Inc (GRUB US)</a>; however, JUST EATs (a European firm) acquired Grubhub for  $7.3 bn, which is almost three times the price Uber is paying Postmates.Postmates is likely to strengthen Uber’s Eats business, the segment helping the company to reduce losses since the recent quarter. However, Postmates is  relatively small, and Uber still has to face competition from Grubhub and <a href="https://www.smartkarma.com/entities/doordash-inc" target="_blank" data-smartkarma-citation="entities:28881:1" rel="noopener">DoorDash Inc (0881510D US)</a>. In our opinion, the acquisition will give Uber synergies and help expand the Eats business. However, it is unlikely to help the company reduce losses significantly, as this requires capturing a dominant market share in the industry, which is challenging and unlikely. We mentioned this in <a href="https://www.smartkarma.com/insights/grubhub-s-descent-is-o2o-tech-in-the-us-food-delivery-industry-reaching-its-potential" target="_blank" data-smartkarma-citation="insights:37717" rel="noopener">Grubhub’s Descent: Is O2O Tech in The US Food Delivery Industry Reaching Its Potential?, </a><a href="https://www.smartkarma.com/insights/doordash-ipo-another-loss-making-start-up-in-a-highly-competitive-industry" target="_blank" data-smartkarma-citation="insights:37433" rel="noopener">DoorDash IPO: Another Loss-Making Start-Up in a Highly Competitive Industry</a>. In addition, we do not think the deal is entirely favourable for Postmates. Postmates is receiving a 15% premium on its latest valuation, however, it is an all-stock deal, and Postmates shareholders will have to bear the risk of Uber’s share price performance. We go through the details below.

Uber (UBER US) confirmed that it is buying Postmates for $2.65bn in an all-stock deal. According to news reports, Uber will run the Postmates app alongside its own Eats business. Uber will also merge some of the technology and delivery operations at the back end; for instance, having the same drivers deliver for both platforms. The deal is yet to go through regulatory approvals. For now, Uber and Postmates have both confirmed the deal. The two companies state that their missions are aligned, which is to use the platform to have anything delivered on-demand; thus, integrating the two businesses will be relatively easy. Moreover, during COVID, Uber Eats platform expanded its product offerings to include daily essentials, groceries and etc. Thus, Uber may be counting on strengthening its Eats business to target a broader market and possibly reduce its losses.Uber is now focusing on strengthening its business in the U.S., after having sold most of its businesses in Asia. Perhaps Uber thinks it is easy to focus on the home market where they already have a significant market share. In Asia, Uber had to compete against local players like Grab, GoJek, and Zomato ( Alibaba-Backed Zomato Buys Ubers’ Eats Business in India). There were also rumours that Uber wanted to acquire Grubhub Inc (GRUB US); however, JUST EATs (a European firm) acquired Grubhub for  $7.3 bn, which is almost three times the price Uber is paying Postmates.Postmates is likely to strengthen Uber’s Eats business, the segment helping the company to reduce losses since the recent quarter. However, Postmates is  relatively small, and Uber still has to face competition from Grubhub and DoorDash Inc (0881510D US). In our opinion, the acquisition will give Uber synergies and help expand the Eats business. However, it is unlikely to help the company reduce losses significantly, as this requires capturing a dominant market share in the industry, which is challenging and unlikely. We mentioned this in Grubhub’s Descent: Is O2O Tech in The US Food Delivery Industry Reaching Its Potential?, DoorDash IPO: Another Loss-Making Start-Up in a Highly Competitive Industry. In addition, we do not think the deal is entirely favourable for Postmates. Postmates is receiving a 15% premium on its latest valuation, however, it is an all-stock deal, and Postmates shareholders will have to bear the risk of Uber’s share price performance. We go through the details below.

우버, 포스트메이츠와 손잡고 미국 내 이츠 사업 강화 나서

Uber Technologies

우버, 포스트메이츠와 손잡고 미국 내 이츠 사업 강화 나서