Online food delivery apps have grown in leaps and bounds in the last few years. While there are a bunch of names to choose from, Zomato and Swiggy remain some of the most popular contenders. However, in a shock move, Zomato has acquired the Indian operation of Uber Eats.
In a deal worth about $350 million or Rs 2,485 crore, the all-stock transition will grant Uber about 10 percent shareholding in Zomato, reports ETTech. After the deal, Uber Eats as a standalone app will cease to exist. Further, it’s users will be redirected to Zomato’s app, the report reveals.
However, despite the deal, Zomato will reportedly not be absorbing the team working at Uber Eats. Hence, about a hundred executives will be relocated within other Uber verticals or be laid off.
The Zomato Uber Eats deal wasn’t a sudden move
The deal between Zomato and Uber Eats was reportedly in the works for over a year. The execution of the move marks a big step in the big food delivery industry in the country, currently led by Zomato and competitor Swiggy. In a somewhat similar move, cab-service Ola bought Foodpanda from its German parent company Delivery Hero. However, Ola hasn’t really impacted the industry with the deal since.
The Uber Eats buyout was reportedly helped by Zomato’s latest fundraising which was led by Ant Financial. The Alibaba-affiliate boosted Zomato with $150 million at a $3 billion valuation. On the other hand, Uber wasn’t doing very well with the food-delivery business. The company had projected an operating loss of Rs 2,197 crore in its food delivery business for five months through December. Uber had also mentioned in its quarterly results announcement that the food-delivery business had been a drag for the company.
Now, with Zomato acquiring Uber Eats, the market share of food delivery is likely to tilt in Zomato’s favor. Also getting the customer-base of both apps now, Zomato could enjoy a 50-55 percent market share in the industry post the deal. Hence, the deal not only gets Zomato an edge over rivals Swiggy, but also reduces competition for it.