Uber Technologies Inc. today announced plans to acquire competing food delivery provider Postmates Inc. in a $2.65 billion all-stock deal. 

The transaction is a win for Postmates’ investors. The $2.65 billion Uber will pay is a premium to the $2.4 billion valuation the food delivery provider received after its most recent funding round.

The deal also a win for Uber, which offers the Uber Eats food delivery service and has reportedly sought to acquire a rival in this market since at least 2019. The company is said to have held unsuccessful merger talks with DoorDash Inc. last year, then tried to purchase GrubHub Inc. last month. GrubHub ended up being acquired by Uber rival Just Eat Takeaway.com NV.

Postmates is the smallest of the three food delivery providers Uber has sought to buy. Still, the deal will give Uber a sizable market share boost if it’s approved by regulators. Based on market data from Edison Software Inc., absorbing Postmates would increase the company’s share of the U.S. food delivery market from 28% to 35%, which would make it the second-largest player behind DoorDash.

Uber shared a glimpse into privately held Postmates’ earnings in an investor presentation after the acquisition announcement. Postmates processed $648 million worth of food orders in the first quarter and generated $107 million in revenue from those purchases.

In the second quarter, however, Postmates’ revenue growth was more than 30% lower than Uber Eats’. Uber’s main goal with the deal appears to be not so much to accelerate its revenue growth as to move its money-losing food delivery operation closer to profitability. 

The company stressed the latter point in the investor presentation today. According to Uber, the deal is “expected to accelerate our path to profitability” by providing more than $200 million in annual cost savings starting the year after the transaction closes. There are also other factors with the potential to boost Uber’s quest to profitability, such as the “increased order efficiency” Postmates sees thanks to the fact that more than 30% of orders come from subscription customers.

Uber plans to keep the Postmates app available separately from Uber Eats. However, the companies’ merchant and delivery networks will be integrated. An integrated backend operation would theoretically make it easier for Uber to merge the Postmates app into Uber Eat, were such a move ever to become a possibility further down the road. 

“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery—they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19,” Uber Chief Executive Dara Khosrowshahi said in a statement.

The Postmates acquisition could also give Uber a boost in other parts of the logistics market. Besides restaurant orders, Uber also delivers groceries, personal packages users send to one another and other items. Postmates’ “industry-leading courier efficiency” of nearly three trips per hour in some markets, as the investor presentation described it, could help Uber’s logistics network scale more efficiency as it expands beyond food delivery.

The companies expect the deal to close in the first quarter of 2021.

Image: Uber