Uber has agreed to acquire food delivery company Postmates for $2.65 billion in an all-stock deal, the companies [announced](https://www.businesswire.com/news/home/20200706005133/en/Uber-Acquire-Postmates) Monday.

**Why it matters:**This is the latest merger for the food delivery space as the sector undergoes an ongoing market consolidation.

*   After failing to agree on terms with Uber, [GrubHub struck a deal](https://www.axios.com/grubhub-just-eat-merger-talks-uber-e1b544e4-94dd-4a6e-a59a-51e07d023171.html) to sell to Europe's Just Eat Takeaway last month.
*   Nearly a year ago, [DoorDash acquired Caviar](https://www.axios.com/doordash-caviar-acquisition-c5f7b6ef-0d21-42ec-af10-3c02c0415913.html)from Square.

**The big picture**: The Uber-Postmates tie-up would still put the combined businesses' market share behind DoorDash, which has about 45% of the U.S. food delivery market, according to credit card spending [tracking](https://trends.edison.tech/research/on-demand-food-delivery-sales-2020.html)[companies](https://secondmeasure.com/datapoints/food-delivery-services-grubhub-uber-eats-doordash-postmates/).

*   Postmates has raised just over $900 million in total funding, and was [last valued at $2.4 billion post-money](https://www.forbes.com/sites/bizcarson/2019/09/19/postmates-raises-225-million-pre-ipo/#60ccadfa2baf). 
*   This deal also showcases Postmates' prowess in the Los Angeles and Miami markets, where the company has strong market share.

**Between the lines**: It's not surprising to see Postmates get acquired. Though it paused its IPO ambitions last year, the company was [recently rumored to resume plans](https://www.reuters.com/article/us-postmates-ipo-exclusive/exclusive-postmates-revives-ipo-plans-amid-food-delivery-deal-boom-idUSKBN24034U) to go public and was also looking to raise new funding, [as Axios reported](https://www.axios.com/newsletters/axios-pro-rata-5ad3cade-7497-46a1-a1fa-0b0b36cffd99.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosprorata&stream=top).

*   Uber has also been drastically reshaping its business since the beginning of the coronavirus pandemic. Its ride-share business has significantly suffered, dropping by as much as 70% in April, and it recently offloaded its scooter and bike rental unit. However, its food delivery arm has seen a surge as restaurants turned to delivery to remain afloat. 
*   The pandemic has also made ride-hailing and delivery more costly for the companies across these industries as they've had to provide more resources to drivers, including paid sick leave and cleaning supplies. 

**What's next:**Both Postmates and Uber have opposed a newly effective California labor law that could force the companies to reclassify their drivers from independent contractors to employees. The companies are backing a state ballot measure to change the law in the coming November elections.