To The Moon

$Uber(UBER)$ is expanding its business again, this time into more markets for delivery with the acquisition of Delivery Hero. From Uber:

Uber Technologies, Inc. (NYSE: UBER) has entered into a business combination agreement with Delivery Hero, extending the world’s largest mobility and delivery platform to a total of 99 markets, with combined pro-forma Gross Bookings of $236 billion in 2025.

Under the terms of the voluntary takeover offer, Uber will offer Delivery Hero shareholders cash consideration of €41.50 per share (the “Offer Price”), representing an Equity Value1 of $14.8 billion (implied for 100% of the company), or $13.7 billion adjusted for Uber’s prior stake purchases.

Delivery Hero has entered into a separate agreement with SSW Partners, a New York-based investment firm that has led cross-border investments alongside global businesses. SSW will acquire Delivery Hero’s businesses in a total of 14 markets, particularly where Uber Eats and Delivery Hero already overlap, subject to completion of the Uber Takeover Offer and other customary conditions, for a consideration of approximately $1.6 billion. Uber will not acquire control over the businesses transferred to SSW, and SSW will independently lead the process to find strategic partners that best position those businesses for long-term success.

Uber press release

Scale is a key to success in ride sharing, but this brings more scale to Uber’s other market, delivery. While I don’t think scale has the same network effects in delivery, the value lies in adjacency and the ability to have drivers handle both ride and delivery pickups across more regions.

And it’s delivery that’s been Uber’s biggest growth driver over the past decade, and that could continue with another $42 billion in 2025 bookings coming onto the platform.

Based on Uber’s projections, this should widen the company’s scale lead over the competition.

While I like the acquisition strategically, Uber’s risk is now more financial.

Uber’s Leverage

Uber isn’t making this acquisition with stock; it’s paying cash, and it won’t be cheap.

Uber will fund the Takeover Offer through existing cash on its balance sheet and new debt financing. Uber has executed a committed bridge facility of approximately €14 billion. The transaction is structured to maintain Uber's strong investment grade credit rating, with gross leverage to remain below 2x, supported by Uber's strong free cash flow generation. Uber's existing capital allocation framework remains unchanged, including its commitment to return excess capital to shareholders through share buybacks.

Uber press release

Uber doesn’t currently have that much cash on hand, and cash flow won’t cover the price by closing in the second half of 2027, so the company is going to have to take out more debt.

Debt is leverage if the deal goes well, but it’s risk if it doesn’t.

I love seeing the growth in free cash flow from Uber (purple above), but I don’t love seeing the growth in debt (orange). Flag that as a concern in my eyes.

The Autonomy Angle

I also think it’s interesting that there’s no autonomy angle here. Delivery doesn’t fit into autonomy as nicely as ride sharing, and M&A is supposedly lower on the priority stack than autonomy.

Maybe there’s more in the works, or management doesn’t think autonomy will be as expensive or as important as gaining market share is. But given the financial and strategic risks, this isn’t a slam dunk.

I also have to wonder if Uber’s growth is stalling out, and this is a defensive move to improve the top line.

I’m still holding on to my Uber shares, but with relations with Waymo souring and leverage increasing, I want to see flawless execution and a big push into autonomy over the next year or two. Buying market share isn’t going to be enough to make this a 10x stock.