Yelp (NYSE:YELP) has announced it would sell one of its businesses to GrubHub (NYSE:GRUB), the parent company of Seamless and MenuPages. Yelp agreed to sell Eat24, an online food-ordering business, to GrubHub in a $287.5 million all-cash deal. The price is a little more than double what it bought the company for two years ago. Yelp acquired Eat24 for $134 million in 2015.
The deal creates a partnership that allows Yelp users to order online directly from GrubHub, and vice versa. Yelp users will have access to the 55,000 or so delivery listings on GrubHub and GrubHub gains the 15,000 or so listings that were previously exclusive to Yelp. The partnership involves an undisclosed revenue split between the two companies. The deal will be in place for at least five years
Eat24 will increase the scale to GrubHub’s network, helping it compete with other food delivery companies. GrubHub spokeswoman Sandra Glading said, “While we’ve always been open to exploring partnerships that leverage our scale, and drive a positive experience for our diners and our restaurants, we’re constantly innovating to evolve the ordering experience.” The sale still faces regulatory approval.
The move is similar to a deal GrubHub announced with Groupon earlier this week to buy Groupon’s ordering platform, OrderUp. GrubHub also bought Foodler, a Boston-based online delivery service, in June. The terms of those deals weren’t released.
News of the deal with GrubHub sent Yelp’s stock sky-rocketing nearly 20 percent in after-hours trading. GrubHub shares briefly fell about 7 percent after hours. Yelp also announced it would buy back $200 million worth of shares.
Yelp announced second-quarter earnings that handily beat analysts’ estimates. The company reported earnings of 9 cents per share on revenue of $209 million, compared with earnings of 1 cent per share on revenue of $173.4 million in the same period a year ago. Thomson Reuters-polled analysts predicted a loss of 3 cents per share on revenues of $205 million.
GrubHub also reported quarterly earnings that were in line with estimates. The company posted adjusted earnings of 26 cents per share on revenue of $159 million. Analysts estimated earnings of 26 cents per share on revenue of $153 million.
Yelp reported double-digit increases in advertising and transaction revenue. The company’s mobile app is on 22 percent more devices than a year ago. The number of reviews reached about 135 million during the quarter. The company is now forecasting that it would have revenue of $855 million to $865 million for the full year, higher than the $856 million analysts expected, on average.