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Zomato Buys loss-making Uber Eats business in an all-stock deal

Zomato acquired India operation of Uber Eats in an all-stock transaction.

Bengaluru| In a move to cut losses, Uber has sold its Food delivery business to Gurgaon based-Zomato. The all-stock transaction will give Uber 9.99% shareholding in Zomato. The estimated value of the deal is $350 million, the report suggests.

Uber launched its food delivery business Uber Eats in 2017 and struggled to take off. The rivals Zomato and Swiggy had already acquired a huge market by the time Uber Eats came to be. This is mainly why Uber Eats could not pick up market share.

This deal will allow Uber to keep the stake in a market which is expected to be worth $15 billion by 2023 and yet cut its losses. Uber Eats will no longer be a separate brand locally and users on its platform will be redirected to Zomato’s App. Although Uber Eats team will not be absorbed.

As a part of the transaction the customer base, Restaurant partners and riders will be exchanged with a 9.99% stake that Uber will hold.

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Earlier this month, Zomato had announced that it has secured $150 million funding from Ant Financial, a subsidiary of China-based giant Alibaba. This round of funding is a part of $600 million funding announced by the CEO of the Food delivery and restaurant discovery platform in December. It is currently valued at $ 3 billion.

Uber Eats has a stronger foothold in parts of Tamil Nadu, Kerala, and Madhya Pradesh with an about 30% market share. Hence, it will give Uber Eats more access to Zomato in certain micro-markets

This acquisition is the latest example of consolidation in the global food delivery market. Uber Eats’ India accounted for a quarter of its adjusted operating losses whereas operations contributed just 3% of gross bookings for the business globally.

This acquisition significantly strengthens Zomato’s position in the category, CEO Deepinder Goyal said in a statement.
(Inputs from Reuters)

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