Uber (UBER) has rejected an all-stock proposal to buy food delivery company Grubhub (GRUB) for 2.15 Uber shares per share of Grubhub, reports CNBC’s David Faber.
According to Faber, the two companies have been in discussions about a deal for about a year, but have so far failed to agree on a price.
“We remain squarely focused on delivering shareholder value,” Grubhub wrote in a statement to CNBC. “As we have consistently said, consolidation could make sense in our industry, and, like any responsible company, we are always looking at value-enhancing opportunities. That said, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment.”
Meanwhile Uber wrote: “We are constantly looking at ways to provide more value to our customers, across all of the businesses we operate.” The company added: “We have shown ourselves to be disciplined with capital and we do not respond to speculative M&A premiums.”
According to Bloomberg, an agreement could be reached as early as this month. The news sent Grubhub shares surging 38%, before closing Tuesday’s trading 29% higher.
Overall, Wall Street analysts have a bullish outlook on Uber stock with 26 Buys, 2 Holds and 1 Sell- giving UBER its Strong Buy consensus. The $39.59 average price target indicates 22% upside potential lies ahead. Shares are currently trading up 9% on a year-to-date basis. (See Uber stock analysis on TipRanks).
“Clearly this would be an aggressive move by Uber to take out a major competitor on the Uber Eats front and further consolidate its market position, especially as the COVID-19 pandemic continues to shift more of a focus to deliveries vs. ride sharing in the near-term,” Wedbush analyst Ygal Arounian wrote in a report to investors on May 12.
He also added that he “wouldn’t rule out a bidding war with DoorDash.”
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