Dive Brief:

• Uber acquired Postmates for $2.65 billion on Monday, marking the largest deal between two American-based food delivery companies in 2020, according to a press release. The deal is expected to close in Q1 2021. 
• The all-stock acquisition, which comes on the heels of Uber's failed deal with Grubhub, will give Uber Eats the largest market share in Los Angeles and build on its lead in Miami, which are Postmates' two largest cities. Uber estimates it will issue approximately 84 million shares of common stock for 100% of the fully diluted equity of Postmates.
• "As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100 percent year on year. We’re thrilled to welcome Postmates to the Uber family as we innovate together to deliver better experiences for consumers, delivery people, and merchants across the country," Uber CEO Dara Khosrowshahi said in the release. 

Dive Insight:

This deal comes just weeks after Uber's failed attempt to acquire Grubhub, and gives Uber Eats 35% of U.S food delivery market share, according to April data from Edison Trends. This puts the company second only to DoorDash in the American delivery race, which holds 45% of market share. 

Postmates could help Uber's Eats segment carry the company through the economic uncertainty of the novel coronavirus crisis. The platform's Rides segment saw gross bookings slip 80% in April compared to the year-ago period, but Eats' gross bookings rose more than 50% during the period.

This acquisition also follows Uber's recent move to fold its JUMP bike and scooter operations into Lime's portfolio, a deal similarly believed to position Uber on a more favorable growth path.

Though Postmates is only the fourth-largest American food delivery company by market share, its strongholds in Los Angeles and Miami give Uber a new edge on the West Coast and a more robust presence in the Southeast. But DoorDash — the last major standalone player in the U.S. market — is quickly gaining ground in the Los Angeles market, so the balance of power there will need to be defended. 

Uber's Postmates grab could also accelerate consolidation in the U.S. delivery market, which has turned to mergers and acquisitions in a bid to reach profitability. The food delivery market has also explored new technologies to innovate service, such as autonomous delivery vans and robots to assist human delivery carriers.

Even with a competitor out of the field and in its own network, Uber Eats still faces an uphill battle when it comes to profitability. 

"The competition is so fierce that none of [the delivery platforms] are making money. And until last year when Uber went public, they're all being funded by private equity dollars that were being thrown at each other. There needs to be some rationalization that comes with consolidation," former Uber Chief Business Officer Emil Michael told Restaurant Dive in a recent interview.