Yelp (YELP - Free Report) jumped 27% in morning trading on Friday after announcing it will sell Eat24 to GrubHub (GRUB - Free Report) for $287.5 million in cash. This deal will allow Yelp users to order food online directly from GrubHub.
Shares of the online food ordering company GrubHub have also reacted positively to the news, rising 9% in morning trading.
“The Eat24 team has been instrumental in Yelp’s success over the past two years and we are excited to continue to work with them as a part of GrubHub,” said Yelp’s co-founder and CEO Jeremy Stoppelman.
Yelp acquired Eat24, an online food-ordering business, for $134 million in 2015. Lanny Baker, Yelp’s CFO, said that this deal with GrubHub “demonstrates the value we’ve created over the past two years.”
Eat24 will increase GrubHub’s network, allowing its users to order food from a larger selection of restaurants. The deal will also help GrubHub contend with competitors, such as UberEats. Despite Uber’s recent PR woes, its food ordering subsidiary has grown in the last two years thanks to Uber’s massive global network. According to data from Apptopia, UberEats now has the most monthly active users among large food delivery apps.
The sale can also help Yelp compete with its rivals Tripadvisor (TRIP - Free Report) and Groupon (GRPN - Free Report) who have similarly integrated with GrubHub.
Yelp’s sale of Eat24 coincided with its second quarter fiscal 2017 results. The online restaurant review company reported earnings of $0.09 per share, beating our consensus estimate of -$0.03 per share. Yelp also reported revenue of $208.9 million, representing 20% year-over-year growth.
YELP remains a Zacks Rank #4 (Sell), with a VGM score of ‘B.’
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