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Grubhub surges on report it will combine with Uber Eats

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Yahoo Finance's Myles Udland, Jen Rogers, Dan Roberts, and Melody Hahm discuss the possible merger between two big players in the food delivery space.

Video Transcript

MYLES UDLAND: Well, if people think that maybe sentiment has gotten ahead of itself here with respect to the market, certainly what we saw today in the food delivery space would let you know-- maybe it's a mini top. I don't know. Anytime you see a potential all-stock deal floated, that's certainly what you think. This, of course, reports that Uber has been exploring a tie-up with Grubhub.

Now, Grubhub coming out in a statement just a couple hours ago, about 90 minutes ago, saying that, you know, their policy, as many companies, not to comment on specific market rumors. But they remain squarely focused on delivering shareholder value.

Now, Grubhub came out back in January, saying that they weren't really thinking about being taken over. They don't really want to be taken over. They've been the longest running, independent operator in the food delivery space.

But Dan Roberts, this drumbeat around necessary consolidation in food delivery, it's not going to go away. Whether Uber buys Grubhub or not, there is never going to be an end to the rumors about which one of these-- I guess we'll call them four main players with DoorDash and Postmates in there. Which one of these companies get together eventually?

DAN ROBERTS: Well, first of all, Myles, I mean, much like our daily conversation about the stock action many days not really matching the actual economic data we're seeing and the data about coronavirus, I mean, similarly, it's just funny to see these headlines about Uber making such a big play when Uber just laid off a ton of people. And I think probably for a lot of people, they see those headlines and they say, wait a minute. How does that make sense? How can that company even afford to buy Grubhub? Of course, all-stock deal, fine. But man, there's a lot right now that sort of seems to fly in the face or contradict other data.

Now, I also think you might see the narrative for Uber as a company shift if this happens. I mean, we remember when Uber Eats looked like it was this one little interesting nugget within the larger ridesharing business. Right before the company went public, it valued Uber Eats at $20 billion. And some people said, really?

But man, if Uber Eats were to go ahead and manage to swallow up Grubhub, after coronavirus, especially amid the declines in the ridesharing part of the business, you might start to see people see Uber as not a ridesharing business first, but as a food delivery business. Maybe they see more appeal in that business. And certainly, unlike the ridesharing, food deliveries, you know, that's a business that, amid quarantine, looks like maybe it'll be healthy for a long time.

But man, it's also a pretty low barrier to entry to a very crowded space. But if Uber could pull it off, I think it really changes the fabric and the identity of Uber.

MELODY HAHM: And earlier today, we actually spoke with Dan Ives of Wedbush. And we asked him about more consolidation, right? This could be the beginning of a larger trend, especially as deals seem perhaps cheaper than obviously in a more healthy market. When you think about even the grocery delivery space, we've really talked a lot about that, right, where it is saturated, but there's so much demand right now. And we wonder if, post-pandemic, those kinds of habits will be sticky.

And Ives's argument is that, yeah, potentially down to future, even if this Grubhub deal doesn't even happen, right, Uber could want to create a robust basket of services where it could be the go-to destinations, as Dan mentions, where it sort of reinvents itself, and uses this side project as its main gig.

JEN ROGERS: Watching Uber stock today-- usually, if you have an acquire go out, you can have their stock fall. Uber, that has not been the case. That's because, as we've been talking about for so long, this whole industry needs to be right-sized, and to your point, Melody, of other deals coming out. So what happens to DoorDash, which filed confidentially for that IPO? What's going to happen to Postmates in here as well?

And on this deal, are there going to be other people that want to step in and pay up for that scale? Could there actually be a bidding war here? I mean, that's going to be-- as this market has gotten calmer, maybe we'll get an actual fight here for Grub. Could be interesting to see.

MYLES UDLAND: Well, and I mean-- like Dara Khosrowshahi has said it. Any investor in the space has said it. There has to be a bidding war, a fight for this because the data has shown there can only be one, maybe two suppliers in a market who actually make money. And so if there are four main players right now, unless they got together, which obviously they haven't, and divvied up the markets such that they could be one or two, there's going to be consolidation. There's just no way around that.

JEN ROGERS: I mean, who-- we also had-- remember when Grub was making the big moves and the noise in the fall. Walmart in play there as well. So is it just consolidation among the purer delivery names? Or does somebody else step in that's maybe a little bit outside the box as well?

MYLES UDLAND: You know, it's--

JEN ROGERS: Because food is so important now, Myles.

MYLES UDLAND: It's funny you mentioned that because the whole, like, oh, Walmart and Amazon will just get into any possible business, I think that is probably something that's left in the last bull market. The future is, I think, companies getting back to their-- what was it? Back to their knitting? Is that the cliche?

Like Uber does food delivery already. They're probably going to focus more on that. I think Walmart right now needs to focus on, like, Walmart stores. And they can do their streaming video service in 2026, when we're back in a new economic expansion, after this is all over.

DAN ROBERTS: And guys, if Walmart's watching, Quibi then. They're in no hurry right now to prioritize VUDU.

MYLES UDLAND: Yeah, you have to do things you're good at currently, not invent new things you want to maybe be good at, when everyone's behaviors are changing overnight. Rough interview there with Jeff Katzenberg. A couple of choice quotes. I'm sure many of our viewers have seen that in "The New York Times" yesterday. All right--