GrubHub Inc (NYSE:GRUB) shares are soaring as it received an analyst upgrade.
The online food-review site recently announced the acquisition of Yelp Inc (NYSE:YELP), which saw its stock rally early this week. The news was announced last week.
Several analysts upgraded the stock’s price target and rating on the news. GrubHub’s purchase will cost it $288 million and it will be an all-cash acquisition.
The figure is more than half of what Yelp spent to acquire Eat24 — $134 million. Food delivery is a difficult industry at the moment, and Yelp believes that a merger with GrubHub will help the combined company gain market share and have more to offer.
The move will net GrubHub and Yelp a five-year partnership that will include Yelpers’ reviews into the restaurant listings of GrubHub. This will give consumers a better idea of what they’re getting into when they go out to eat.
The money isn’t all that Yelp is getting as the company will also get a piece of sales (“a partnership fee”) whenever somebody places a GrubHub order through Yelp.
Eat24 makes up about 16% of online restaurant deliveries, while GrubHub has 34% of the market share, and UberEats makes up 20% of these deliveries. GrubHub has 55,000 eateries, compared to Eat24’s 40,000 restaurants.
GrubHub’s CEO Matthew Maloney calls the merger “huge for both companies.”
GRUB stock surged 8.25% Monday, while YELP shares grew 4.2%.
