Uber Eats merges with Zomato for 9.99% ownership stake

Uber Eats, a food delivery extension of Uber India has merged with Zomato in an all-stock transaction on Tuesday.  The deal is set to bring Uber 9.99% ownership in the SoftBank-backed Zomato and help the US cab service provider to slack its loss-making business verticals globally.

Uber can cut losses while taking a stake in the start-up that was valued at $3.55 billion recently. Uber will continue to operate its cab service providing business in the country, where it competes majorly with Indian brand Ola.

For Uber, the strategic tactic can result in annualized savings of approximately US$750 million, according to official statistics. In the first three quarters of this fiscal year, Uber Eats India totalled 3% in gross bookings but accounted for more than 25% of adjusted EBITA losses.

The deal comes after Zomato generates $150 million in funding from existing investor Ant Financial, an Alibaba affiliate, at a $3 billion valuation.

The merger is seen as a strong move to gain market dominance in the food delivery business. Entering into the market when Swiggy and Zomato were already buffed up to acquire the significant market chunk, UberEats relied on discounting to both bring and retain customers.

Unable to gain market prominence, the merger is seen as a win-win situation for both Uber and Zomato. “We are proud to have pioneered restaurant discovery and to have created a leading food delivery business across more than 500 cities in India. This acquisition significantly strengthens our position in the category,” Zomato CEO Deepinder Goyal said.

Dara Khosrowshahi, CEO of Uber, said: “Our Uber Eats team in India has achieved an incredible amount over the last two years, and I couldn’t be prouder of their ingenuity and dedication.”

The online food-delivery platforms are widening both choice and convenience, allowing customers to order from distant and broader selection of restaurants through a single tap of their phone. The new acquisition signifies the rise in consolidation trend that firms are leveraging when it comes to the food delivery market.