uber to purchase majority stake in cornershop for us$450 million
Contxto – While initially undisclosed, sources recently revealed that Uber’s acquisition of Cornershop could reach US$459 million via cash and stocks. So far, Uber has already injected US$50 million since purchasing 51 percent of the Mexican-Chilean startup in October.
“We are very impressed with the team that has been able to develop a great product with really limited capital,” said Uber CEO Dara Khosrowshahi. “Cornershop has a product that has been highly optimized for a long period of time. We can put that product through our sales channel, so to speak, and expose it to our customers.”
This alliance also showcases Uber’s intentions to expand throughout Latin America. According to Khosrowshahi, the region will be the first to test out Cornershop’s service via Uber.
“Obviously, we have a very large influence in Latin America and we will expose Cornershop and other products to our Uber Eats customers and our Latin America travel clients,” said the CEO.
“If it works there, and we are pretty sure it will, we will seek to extend it. But first, it will be within the markets of Latin America where Cornershop has a lot of experience. This is about putting a great product in front of a large audience that is already committed to all payments, identity, all that kind of care. ”
Resulting from this majority stake, the deal could double the proposed value of Walmart’s failed US$225 million acquisition of Cornershop. As a result, this will increase Cornershop’s valuation by 300 percent.
Some sources claim Uber is, in fact, acquiring 66 percent of the company, bringing its valuation to US$675 million approximately. Nevertheless, we’re reaching out to both companies to clarify the details.
More than a ride-hailing app
Based on this collaboration, Uber has made it clear that it aspires to be more than just a ride-hailing app. Rather, it intends to be an “operating system” for modern-day conveniences leveraging the latest technology.
“Whether it’s getting a ride, ordering food from your favorite restaurant, or soon, getting groceries delivered, we want Uber to be the operating system for your everyday life,” said Khosrowshahi, who expects the deal to close in early 2020.
“We’re excited to partner with the team at Cornershop to scale their vision, and look forward to working with them to bring grocery delivery to millions of consumers on the Uber platform.”
All the while, this pairing showcases Cornershop’s determination for a major company to acquire it. In case you missed it, it isn’t the first time the online grocery store provider has made such attempts.
Failed Walmart acquisition
This past June, Walmart attempted to buy out Cornershop for US$225 million. In the end, COFECE rejected the deal, fearing that it would result in monopolized power within the grocery delivery industry.
Ultimately, the Chilean-Mexican company had to figure out different exit options rather than pursuing its Walmart acquisition. Considering what just happened with Uber, Cornershop has found finally found its alternative.
According to Cornershop’s co-founder and CEO Oskar Hjertonsson, this new dynamic reinforces its original mission to serve Latin America.
“In 2015, we started Cornershop with primarily the Latin American market in mind and we couldn’t be more excited to work with Uber to help us take that mission much further,” said Hjertonsson.
“Uber is the perfect partner as we embark on our quest to bring our unique flavor of on-demand groceries from incredible retail partners to many more countries around the world.”
Reportedly able to deliver groceries in under an hour, Cornershop works with retailers such as Costco, Cedraui, as well as Walmart. Moving forward, it will continue to operate under its own leadership. However, the startup will report to a board with the majority of representatives from Uber.
Market saturation, legal limbo
Since other companies such as Amazon, Instacart and Postmates are trying to gain market shares within the grocery industry, there’s no denying that Uber will face competition as it enters this field.
Moreover, many consumers are still hesitant to shop for groceries online. Even in the United States, only 3 percent of sales occur on the web. Common concerns range from overcharges to late deliveries.
Meanwhile, Uber’s legal status in Chile is still in the grey zone. According to Reuters, a regulatory bill for the digital application continues to pass through the Chilean congress, slowly but surely. Taxi firms and labor unions hope to regulate the industry to avoid unfair competitive advantages.
Recent expansion
Despite the perceived setbacks, though, Cornershop has certainly surprised us with its recovery. After seemingly accepting defeat over the Walmart acquisition from COFECE, the startup then expanded to Peru and Toronto.
Today, Cornershop has headquarters in Santiago, Chile while also maintaining operations in Mexico, Peru and Toronto. Past investors include Accel, ALLVP, Creandum and JSV.
-JA
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