Uber agrees to buy catering marketplace ezCater for $2.3 billion in cash

Uber Technologies agreed on Tuesday to buy ezCater, a marketplace that companies use to order catered meals for meetings, events and office lunches, in an all-cash deal valued at $2.3 billion. The purchase is a bet that Uber Eats can win bigger, recurring corporate orders on top of the individual deliveries it already handles.

The companies announced the agreement before U.S. markets opened. It still needs regulatory approvals and other customary conditions, and Uber said it expects to close in the coming months. Until then, ezCater remains an independent company.

What Uber is buying

ezCater, which is based in Boston and was founded in 2007, connects businesses with more than 140,000 restaurants across the U.S. It handles one-off meetings and events as well as recurring employee meal programs, and offers tools that let companies manage ordering and food spending.

Uber said ezCater generated more than $2.5 billion of gross bookings over the past 12 months, growing in the high teens from a year earlier, and that its average order is more than $400. Gross bookings measure the total value of orders placed on the platform, not the revenue ezCater keeps. Uber also said the business is profitable on an adjusted operating income basis, a measure that excludes some costs, and that it expects ezCater to lift Uber's margins rather than dilute them. Neither company disclosed ezCater's revenue or profit.

By TickerGrove's arithmetic, Uber is paying a little less than one times ezCater's annual gross bookings. The price is about 44% above the $1.6 billion post-money valuation from ezCater's last disclosed funding round, a $100 million raise in December 2021 that brought its total funding to $425 million.

Why catering fits Uber Eats

Uber plans to combine ezCater's catering business with the Uber Eats restaurant network and Uber for Business, which already works with organizations of all sizes. It said restaurants would get larger orders and new diners, companies would get a simpler way to feed groups, and couriers on Uber Eats would get new ways to earn.

"Catering is a big business, and can be a huge revenue stream for restaurants," Dara Khosrowshahi, Uber's chief executive, said in the announcement. "With Uber’s reach, we can bring that experience to millions more customers and help restaurants win more of these valuable orders."

Nihad Rahman, ezCater's chief executive, described what his team had built as "the leading platform for workplace catering, and a major growth channel for our restaurant partners."

How big the deal is for Uber

The purchase is small next to Uber's own delivery business. Uber's Delivery segment recorded $27.5 billion of gross bookings in the second quarter alone, up 26% from a year earlier, so ezCater's bookings for a full year equal about 9% of what Uber Delivery handled in a single quarter. The $2.3 billion price is about 1.6% of Uber's roughly $141 billion stock market value.

Uber ended June with $5.4 billion of unrestricted cash, cash equivalents and short-term investments, and said its free cash flow over the previous 12 months had topped $10 billion for the first time. The companies did not say how Uber would pay for ezCater.

The deal arrives while Uber is working through a far larger acquisition. Its offer of €41.50 a share for Germany's Delivery Hero is open for acceptances until Nov. 5, and Uber expects to settle that deal, including paying the cash, in the second half of 2027.

Uber shares were at $69.16 at 11:30 a.m. ET, down 0.5% on the day, according to cnbc.com market data. That is about 6% above the stock's 52-week low of $65.41, set in July.

The office is the risk

ezCater's business depends on people being at work. When it raised money in December 2021, the company said its revenue had fallen 85% at the start of the pandemic before it expanded from one-off meetings into full workplace food programs and climbed back above its pre-pandemic revenue run rate. The high-teens bookings growth Uber cited points to demand still rising, but the business remains tied to office attendance and corporate meal budgets.

Uber reports third-quarter results on Nov. 4, with a conference call at 8 a.m. ET, when investors may hear more about the deal. J.P. Morgan advised Uber, with Covington & Burling as legal counsel and Freshfields on antitrust. Evercore and Davis Polk & Wardwell advised ezCater.