Grubhub Inc. plans to gobble up another online food-ordering rival. This time it's Yelp Inc.'s Eat24. Chicago-based Grubhub said Thursday that it will pay Yelp $287.5 million in cash for Eat24. That's more than double what Yelp, based in San Francisco, paid to acquire Eat24 two years ago.
The two companies also announced a five-year deal that will enable readers of Yelp's reviews to order food from restaurants that use Grubhub.
Grubhub plans to keep alive the Eat24 brand, which it said appeals to a younger demographic.
Grubhub Chief Executive Matt Maloney said in a prepared statement that the two companies had "complementary goals and strengths," and the deal, if approved by regulators, will be a boon to both.
As part of the deal, Eat24, which has a Yelp-connected online ordering platform, will have access to Grubhub's vast network of delivery drivers (until now, restaurants using Eat24 have had to deliver food themselves). Meanwhile, Grubhub will be able to get its service in front of millions of potential customers who browse Yelp for restaurant recommendations (Yelp has more than 100 million monthly visitors to its app and mobile website).
"This puts Grubhub in an incredibly dominant position," said Aaron Turner, an analyst with Wedbush Securities. "And it benefits Yelp because it takes them out of direct competition with Grubhub."
Grubhub previously acquired other competitors, including LAbite and DiningIn. Earlier this week, it announced a deal with online deals site Groupon, in which it will take over 27 markets of Groupon's OrderUp food ordering service.
If the acquisition of Eat24 goes through, Grubhub will likely be able to "outcompete" existing competitors such as Doordash and Square-owned Caviar, Turner said.
"Grubhub has a size and scale advantage that a lot of these companies don't have," he said.
Grubhub shares dropped 1.5% in extended trading, while Yelp surged 19%. Both companies also reported earnings results after the bell.
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