Yelp shares leap after selling its Eat24 business to Grubhub
Shares of Yelp jumped more than 27 per cent on Friday, a day after the company announced the sale of its Eat24 business to Grubhub.
As part of the US$287.5 million sale, Yelp and Grubhub will enter into a five-year partnership that integrates Eat24 with Grubhub’s food ordering service. The deal allows Yelp, which specialises in restaurant reviews, to reap the benefits of Grubhub’s specialty in online food ordering.
In addition to higher-than-expected second-quarter revenue and the announcement of a US$200 million share repurchase programme, the deal played a role in the share rise, said Wedbush Securities analyst Aaron Turner.
“The partnership expands the ability to monetize its restaurant traffic. The market is reflecting the potential,” Turner said of Yelp, noting the company will collect a commission on each food order placed on Eat24.
Yelp’s second-quarter revenue rose 20 per cent to US$209 million, above the US$205 million expected by analysts, on average.
The acquisition is one of a number of recent purchases Grubhub has made within the on-demand food ordering industry.
Last week, it bought Groupon’s OrderUp delivery service, which focuses on college campuses, and in June it bought Foodler, a Boston delivery service.
Grubhub shares were up 9.5 per cent on Friday.