Uber’s New Acquisition and GE Aerospace’s Search for Parts

**Tyler Crowe** (0:02)
Who ordered the Uber acquisition today on Motley Fool Hidden Gems Investing?
Welcome to Motley Fool Hidden Gems Investing. I'm your host for today, Tyler Crowe, and today I'm joined by longtime contributors, Jon Quast and Matt Frankel. Earning season is starting to heat up. Not as many companies are rolling in. We're gonna start to see that later in the month, in early August, but we do have some early trickles in. Notably today, we had GE Aerospace. We'll also get to our mailbag where we have some listener questions, but we want to start today with the big announcement from Uber Technologies who announced that they are going to acquire a German delivery company, Delivery Hero, in a $14.8 billion deal. Now, this has been telegraphed a little bit. Uber already had a outstanding stake in the company, and they agreed to acquire from, I believe it's, I hope I don't pronounce this wrong, but Proces, they had a stake in the company, and they've agreed to sell it to Uber. So Uber is going to have a 53% stake with this, and then do a voluntary, hey, who wants to sell their shares to us? We'll buy them at a set price. That's how the deal is structured. There's also a little bit of sell some of Deliver Hero's assets in certain countries to avoid any jurisdiction, regulatory, antitrust issues. But I think the big thing to me, and Matt, I want to really win on this here.
When I think of Uber, we all just think of ride-hailing more specifically than delivery, and so this $14.8 billion deal seems to be like, hey, we really want to be much more in delivery than we do just the ride-share part.

**Matt Frankel** (1:43)
Yeah. Most investors don't realize it, but Uber's Mobility, which is their name for the ride-share business, and their delivery bookings are almost dead even, almost 50-50 in terms of booking volume. The average person spends more on a delivery order than on a mobility order. You might get an Uber ride somewhere for $10, but the average meal you have delivered might be $50 or $60.
Both grew about 25% year-over-year in the most recent quarter, but ride-share is still Uber's biggest revenue source by a significant margin. They take a roughly 50% larger cut from bookings on ride-share versus delivery. So this deal will make the delivery business significantly larger by bookings compared with ride-share. The bigger question here, as you mentioned, is why? So Delivery Hero has an established presence in several markets already, so this allows Uber to expand its physical reach without building market-by-market, which is expensive and kind of a risk.
It roughly doubles the number of markets where Uber will offer both delivery and ride-share in its app, which is a big competitive advantage. And speaking of competitive advantages, this is really a response to DoorDash, which has been aggressively expanding internationally and is really trying to out-compete Uber.

**Tyler Crowe** (3:01)
Jon, not to like completely discount it too, but in addition to ride-share, delivery, which is kind of creating this ecosystem, they're also, they do have a rather versioning advertisement business as well that they can layer onto this rather well, right?

**Jon Quast** (3:15)
Yeah, I think that there's absolutely an angle here that we need to consider with advertising. Not to discount anything that Matt just said, I mean, there is a competitive angle here to this acquisition of Delivery Heroes. Certainly DoorDash figures into the equation somewhere. But as you think about what Uber is, people don't realize how big and important the advertising business is. Really, it was the launch of advertising that propelled Uber to become a profitable business a few years ago, and really just change those economics considerably. Now, if you think about what does it take to build a digital ad business, you really want platform adoption and interaction with that platform, so that you can display the digital ad to the user, to the eyeballs, if you will. So if it can get people adopting the platform more, the Uber platform, if it can get people interacting with the platform more, that's a greater chance for digital advertising. And so yeah, you want to grow both the mobility, the ride sharing, but also the delivery, the meal delivery, because that's another, if you will, just another touch point with that end user. And so I think that as you're considering, hey, how do we build this food delivery or grocery delivery even more than what we have today?
I think that there is an aspect that the management team is thinking, how do we get people interacting more with the platform because we want to show them an ad, because that's really good for our business.