Uber and DoorDash Held Merger Talks After SoftBank Push

Uber and DoorDash held talks to combine last year in a deal that would have accelerated the long-awaited consolidation of the lossmaking food delivery industry, according to people close to the discussions.

The talks, held roughly six months ago, took place at the behest of Japan’s SoftBank, a shareholder in both companies through its $100bn Vision Fund, these people added. While the merger discussions did not result in a deal, the two sides have not ruled out returning to negotiations or attempting to merge with a rival.

DoorDash executives were cool towards the idea of a merger at the time, believing that their own food delivery service had stronger growth prospects than Uber’s service, Uber Eats.

SoftBank and DoorDash declined to comment. An Uber spokesman said: “We’re in constant dialogue with all our shareholders, but to be clear: our M&A strategy is ours and ours alone.”

DoorDash, which was valued at $12.6bn in its last funding round in May, last year emerged as the market leader in US food delivery, taking 37 per cent of sales in December compared with 21 per cent for Uber, according to the data provider Second Measure.

SoftBank had pushed for the discussions between the two companies, some of these people said, adding that the Japanese investor has been particularly concerned about Uber’s difficulties operating in the food-delivery market.

DoorDash was reluctant to entertain merger talks with Uber but ultimately agreed to sit across the table from its rival at SoftBank’s urging, these people said.

The talks came in the wake of Uber’s $8.1bn initial public offering in May and around the time WeWork, another SoftBank investment, was planning a public listing it ultimately withdrew. SoftBank’s Vision Fund was Uber’s largest investor at the time of its listing, owning 15 per cent of the company.

The growing food delivery industry has been marked by intense competition, as rivals such as Grubhub, Postmates and DoorDash attempt to win over customers with discounts subsidised by deep-pocketed private investors.

The groups have so far struggled to become profitable, fuelling talks of consolidation. Uber reported losses of $316m in its Eats business through the third quarter last year, representing a 67 per cent increase from the same point in 2018.

Takeaway.com and Just Eat are currently attempting to seal a £6bn merger, which has come under scrutiny from UK competition regulators.

Since Uber’s IPO, chief executive Dara Khosrowshahi has been fighting a falling stock price and committing to investors that he will turn the company profitable on an adjusted basis by 2021.

Part of that strategy relies on cutting back Uber’s business lines, including Eats, in markets where its pursuit of scale against rival start-ups has seen it burn through cash. In certain regions, Uber has looked to consolidate its position, merge with rivals or shut down its Eats businesses entirely.

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