Uber Technologies Inc. agreed to acquire Drizly Inc., which makes an on-demand alcohol delivery app, for US$1.1 billion, a wager that demand for home delivery will persist after the coronavirus pandemic subsides.
The deal is Uber’s biggest since July when it bought Postmates, a food delivery app. The Drizly purchase primarily consists of Uber stock, with less than 10 per cent in cash, the companies said in a statement Tuesday. Uber shares were up about 8 per cent in the first hour of trading.
Drizly has had a breakout year as consumers stuck at home ordered in alcohol instead of venturing to the store. The Boston-based company operates in more than 1,400 U.S. cities connecting customers with local stores to order beer, wine and liquor. In May, around the height of U.S. lockdowns, sales were about 400 per cent above historical levels, the company said. Consumers both ordered more frequently and bought more per order, it said at the time.
The pandemic transformed Uber from a company that primarily transported people into one that mostly delivers food from restaurants. In response, the San Francisco-based company has spent the last year making deep cuts to spending, including headcount reductions and asset sales. It sold off units that rented electric bicycles, developed self-driving car technology and explored flying taxis. Uber shifted resources to delivery services, and in the third quarter, delivery sales increased 125 per cent.
The Drizly purchase will add an expansive selection of products for Uber to deliver. Uber will make Drizly’s alcohol inventory available within the UberEats app, alongside meals and groceries, while maintaining a separate Drizly app. The deal is expected to close in the first half of the year, the companies said.
Investors in Drizly will want to break open a bottle of Champagne. The company was valued at US$73 million in 2017, according to an estimate from research firm PitchBook. Investors include Polaris Partners and Tiger Global Management LLC, the researcher said.