(Bloomberg) -- Uber Technologies Inc. plans to buy a majority stake in online grocer Cornershop, a deal designed to extend its geographic reach and bolster profits by bundling food delivery with rides.
The move, which is subject to regulatory approval, could end uncertainty for the Santiago, Chile-based startup backed by Accel and other venture investors. Walmart Inc. announced its intention more than a year ago to purchase Cornershop outright for $225 million and re-sell the company to its Mexican subsidiary, only to have Mexican regulators oppose the move in June for antitrust reasons.
Cornershop is the largest home delivery platform in Mexico and Chile. The app allows users to order groceries from a variety of stores such as Costco Wholesale Corp., Petco Holdings Inc., Walmart, bakeries and pharmacies, and have everything delivered at once, usually within 90 minutes. The items usually carry a higher price tag on top of the delivery fee. The four-year-old startup also operates in Peru and Canada. Terms of the deal weren’t disclosed.
The arrangement could play a significant role in Uber’s strategy of layering more profitable services atop ride-sharing. Since the company’s disappointing initial public offering, the share price has dropped more than 30% and Chief Executive Officer Dara Khosrowshahi has sought to reassure investors that Uber is focused on turning a profit and continuing to grow.
When Walmart attempted to buy Cornershop, analysts saw the purchase as a way for the retailer to increase its e-commerce presence with the help of an established app that brought a giant database of users and more importantly, its consumer patterns.
“It’s already positioned, it knows the market well and it was going to accelerate this process for Walmart,” said Marisol Huerta, an analyst at Banco Ve Por Mas. “It’s the same strategy for Uber.”
The acquisition by Uber means the San Francisco-based company will expand on its Eats offering with the ability to deliver not only prepared food from restaurants, but a wide set of groceries, Huerta said. “They’ll be entering a new market but they’ll already have a big data base and the structure to operate in it.”
Uber says it expects the deal to close in early 2020. Cornershop will continue to operate under its current leadership, reporting to a board with majority Uber representation.
“Whether it’s getting a ride, ordering food from your favorite restaurant, or soon, getting groceries delivered, we want Uber to be the operating system for your everyday life,” Khosrowshahi said in a statement announcing the deal.
(Updates with comments from analyst in the sixth paragraph.)
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