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Hungry for a Merger: GrubHub, Seamless to Combine

Monday, 20 May 2013 | 2:39 PM ET
Huw Jones | Lonely Planet Images | Getty Images

Rival online takeout services Seamless North America and GrubHub announced plans Monday to combine and create a company covering more than 20,000 restaurants in 500 cities across the country.

Financial terms were not disclosed. GrubHub CEO Matt Maloney and Seamless CEO Jonathan Zabusky will become CEO and president, respectively, the companies said in a joint statement.

Brian McAndrews, an independent director on the Seamless board, will serve as chairman. Both New York-based Seamless and Chicago-based GrubHub will have significant representation on the new company's board.

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The combined entity's name and marketing brands will be determined following regulatory approval, the companies said.

Online takeout-ordering services work by contracting with restaurants—mostly in metropolitan areas—to list on the websites. Diners can search their menus, as well as reviews posted by diners, order and pay online. In addition to websites, both companies offer smartphone apps for diners on the go.

"We are excited to combine the strengths of these two dynamic organizations in an industry that is rapidly gaining traction," Maloney said in a statement. "We believe the merger will enhance the products we are able to offer both our diners and restaurants."

Maloney, who co-founded GrubHub in 2004, said that the two companies' complementary restaurant and diner networks will position the new service for continued growth in what has become a huge market.

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The services appeal to diners because they eliminate the need to have a kitchen drawer full of takeout menus, and allow customers to discover neighborhood pickup and delivery options. Restaurants benefit from new business and reduced phone orders, which can be labor-intensive and error-prone.

GrubHub and Seamless, both privately held, had about $875 million in gross food orders last year, resulting in combined revenue of more than $100 million. They also aggressively vied with each other for market share, beefing up their sales forces and promoting heavily through social media, email offers and discounts.

The combination should simplify online ordering for both consumers and restaurants, many of whom currently divide their business between Seamless, GrubHub, but other services.

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Seamless North America was spun off from Aramark last fall. Before that, Spectrum Equity Investors had bought a minority stake in the company for $50 million. Seamless covers about 12,000 restaurants in 40 cities, mostly on the East and West coasts but also in Texas (Houston and Austin), as well as in London.

GrubHub's ordering services cover 20,000 restaurants in about 500 cities. Since its inception, the company, which also owns Allmenus.com, has received about $84 million in funding.

Similar services have popped up in recent years. Delivery.com, launched in 2004, lets users order from nearly 10,000 restaurants in 50 cities, while California-based Eat24.com, founded in 2008, covers 20,000 restaurants in 1,000 cities.

Online deals site LivingSocial also launched an ordering service late last year.