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As Street Mulls Potential Grubhub Deal

Uber Sets $750 Million Debt Offer After Grubhub Deal Report

Uber Sets $750 Million Debt Offer After Grubhub Deal Report

As Street Mulls Potential Grubhub Deal, Uber Sets $750 Million Debt Off

Uber to offer $750 million in debt, for corporate purposes which could include potential acquisitions

Uber Technologies Inc. announced Wednesday a proposed offering of $750 million in senior notes due 2025.

The ride-sharing company expects to use the proceeds from the offering for working capital and other general corporate purposes, which could include potential acquisitions.

Uber’s stock has gained 2.4% on Tuesday after reports surfaced that it bid to buy food-delivery service GrubHub Inc.  but CNBC reported later that the companies haven’t been able to agree on a price for a deal.

Uber’s stock, which tacked on 0.4% in premarket trading, has rallied 8.9% year to date through Tuesday, while the S&P 500  has lost 11.2%.

Uber had cash and equivalents at March 31 of about $9 billion, along with $5.7 billion in long-term debt.

Wall Street likes the idea of consolidation in food delivery, a business largely dominated by four players—Grubhub, Uber Eats, and two venture-backed companies, DoorDash and Postmates, both of which have filed confidentially with the Securities and Exchange Commission for initial public offerings.

The Street thinks the combination of Grubhub and Uber Eats would reduce the cutthroat price competition in the industry and allow Uber to sharply reduce its losses on food delivery.

This morning brought a new batch of analyst commentary on the potential deal, including some speculation on potential transaction pricing.

Barclays analyst Deepak Mathivanan lifted his target price on Grubhub shares to $79 from 56, and asserts that Grubhub could be worth as much as $75 a share in a deal. (At the reported price of 2.15 Uber shares, Grub would be worth just shy of $70.) Guggenheim’s Matthew DiFrisco writes that he had previously estimated that a deal for Grubhub could be worth $72 to $83 a share, but that projection predated the Covid-19 pandemic, which has hurt its business in New York City, the company’s most important market.

Uber said last week that it will close its food delivery service, Uber Eats, in markets where it isn’t popular.

In the first quarter, bookings from ride-hailing customers declined for the first time ever due to travel shutdowns, but Uber said that part of its business is now beginning to recover.

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Morgan Stanley, Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Barclays Plc and HSBC Holdings Plc are managing the bond sale, according to the people.