An Uber deal for Postmates has 'sound industrial logic' but might not help pricing dynamics, analyst says
Following a report that Uber Technologies Inc. (UBER) is considering acquiring food-delivery company Postmates (http://www.marketwatch.com/story/uber-moves-to-acquire-rival-food-delivery-service-postmates-report-2020-06-29) for about $2.6 billion, Evercore ISI analyst Benjamin Black took a mixed view of the potential deal. "If the deal were to be approved by regulators, we think the Street would see it as value accretive given the sound industrial logic," he wrote in a note to clients, "though with three scaled players left in the market, it is debatable as to how impactful this transaction will be in expediting the timeline to rational pricing." Black sees opportunities for Uber Eats to recognize cost synergies if it follows through with a deal and said that the company could wind up with "a few fortress cities" in a narrower market for food-delivery operators. At the same time, he said that increased scale "could come at a cost" as Uber faces the possibility of "modest regulatory hurdles," a rival bid from a fellow industry player that could drive up the purchase price, or a rival bid from an outsider that could contribute to an even more competitive landscape. He has an outperform rating and $45 price target on Uber shares, which are up 4.6% in Tuesday trading. They've gained 31% over the past three months as the S&P 500 has gained 18%.
-Emily Bary; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
June 30, 2020 15:41 ET (19:41 GMT)
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