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In a latest development, Grubhub has said that it will buy Yelp’s Eat24 delivery service for $287.5 million in cash, sending Yelp’s stock soaring as Wall Street cheered the deal.
As part of the agreement, Yelp will integrate Grubhub’s ordering into its listings for at least the next five years.
The sum is more than double what Yelp paid for the delivery service two years ago, and the offloading allows the company to return to its core focus as a content hub. Despite offering a service considered essential to most consumers, Yelp has floundered for the last couple years as it’s tried to figure out how to effectively make money off of that demand. Before today, its stock was down 17 percent for the year.
Together with a surprisingly upbeat earnings report, the deal rocketed the share price up more than 18 percent in after-hours trading.
Meanwhile, Grubhub will further tighten its grip on the food delivery market. Eat24 was never a serious threat to the company, which also owns Seamless, AllMenus, and MenuPages, but neither are upstarts like Postmates and DoorDash that were once pegged as potential usurpers. Those three smaller services now control around 2 percent of the food delivery space each compared to Grubhub’s 23 percent, according to Morgan Stanley’s estimates.
Its only real competitor is Domino’s, which has rallied its way to a 24 percent market share on the strength of its ordering technology and efficiency.
Despite a small bump near the closing bell, Grubhub’s stock was down around 3 percent in after-hours trading.
The deal still needs antitrust approval from the Federal Trade Commission, but it’s expected to be finalized by November.