Lyft (NASDAQ:LYFT) and DoorDash (NYSE:DASH) have a strong rationale for merging their companies, according to New Street Research.
A potential merger between the companies could drive 30% upside to long-term EBITDA potential, New Street analyst Pierre Ferragu wrote in a note earlier. A combined LYFT/DASH would lead in delivery and be No. 2 in rides.
If the companies were to merge, the combined firm would have improved margins, helped by better driver economics, revenue synergies and lower customer acquisitions costs, according to New Street’s Ferragu. Assuming a ~6% EBITDA margin for the combined companies’ delivery business and ~8% margins for the rides business, the company would have a 5% margin and EBITDA 30% higher than the standalone firms.
DASH shares fell 7.6% on Wednesday, while LYFT dropped 2.8%.
Last month, DoorDash is said to have held takeover talks with Deliveroo last year. DoorDash (DASH) reportedly held talks to purchase Instacart (ICART) last summer that may have valued the grocery delivery company at $40B-50B, The Information reported in August.
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