Zomato close to acquiring UberEats but with a caveat

The Indian food delivery space is witnessing consolidation. While incumbents Swiggy and Zomato have been competing aggressively with each other, Foodpanda withdrew from the race this year. And now, UberEats may be inching closer to consolidate with Zomato.

If this goes through, the food tech race will become a two-horse one between Zomato and Swiggy — the two companies that spent as much as Rs 4,300 crore in the last fiscal to battle it out with each other. 

Ant Financials-backed Zomato and UberEats have been engaged in conversations for several weeks and according to latest media reports, the deal is only a few steps away to get sealed. If the transaction gets through, Uber may invest $100-200 million of fresh capital in the joint entity.

According to an Economic Times report, the acquisition is only be possible when Uber agrees to put $100-200 million in its food delivery arm. While the report mentions that the acquisition is said to strengthen Zomato’s position in the weak region of southern India, Zomato already had a strong presence in the region.

So, we aren’t sure how UberEats will boost the presence of the Gurugram-based company south India.

This is not the first time Uber has tried to sell its food delivery business to control its losses, especially after its poor show post the public listing earlier this year. Previously, it held talks with both Swiggy and Amazon for a potential acquisition. Last year, it also wounded up Southeast Asia business by consolidating with Grab.

The deal will allow Zomato to use its own platform for premium restaurant deliveries while UberEats would be used for mass-market deliveries, added the report, However, Zomato has already been a mass product as it has a presence in over 600 cities.

The conversations are at an advanced at a time when Zomato is eyeing to raise $500 million led by existing investor Ant Financial at a $3 billion valuation. We aren’t sure whether UberEats will continue to operate independently in the long haul following the transaction. Entrackr sources outline that Zomato will likely to kill the UberEats brand over time.

Industry insiders also say that UberEats is not really expected to add any significant value to Zomato. That said, the deal would certainly bring Uber as a long-term and strategic partner to the Deepinder Goyal-led firm. It could also bring Japan’s SoftBank close to Zomato that is yet to place its bet in the Indian foodtech space. 

Moreover, some sources, requesting anonymity, also said that SoftBank is in favour of writing a large cheque when Zomato and Swiggy would merge. However, many experts believe that the Competition Commission of India (CCI) may not allow such a consolidation since the combined entity would hold a large part of the food delivery market share.