Contxto – Sometimes silence speaks volumes, but this has not been the case when it comes to the Uber-Cornershop acquisition saga over the past few days.
Since no official announcement has been made, one can but speculate about what is going on. But, as events unfold and the evidence stacks up, it is gradually becoming clear that something big is happening.
There are even hints that, even though Mexico’s anti-trust regulator—Cofece—is still crawling towards its decision of whether or not to allow the transaction, Uber and Cornershop are eloping anyway.
In fact, they’ve most likely already done it.
How do we know this?
Let me break down what has been going on down. You’ll quickly come to realize that something is afoot. And that’s before the surprise reveal at the end of this article.
Cornershop vs regulators. A deadly dance
The key word in all of this is “runway”—the amount of time a company has before the cash in the bank runs out.
In the Uber-Cornershop case, everyone knew due diligence had to be done, especially since it had to take place both in Chile and Mexico, due to Cornershop’s dual nationality. So, the company must have hunkered down for the long haul way back in mid-2019.
Yet, by the end of March 2020, things looked so dire that in an act of frustration, Oskar Hjertonsson—co-Founder and CEO of the Mexican-Chilean startup— broke his silence and declared on Twitter that:
How on Earth did it get so bad?
I mean, all things told, Cornershop already had experience with Mexican regulators before. Cofece had actually rejected the scaleup’s bid to be acquired by Walmart. They surely never expected things could be worse than that time around?
Turns out, it could be worse, and, in the end, the catastrophe was a double whammy: One an act of God; the other an act of ineptitude of biblical proportions.
First, the coronavirus pandemic forced demand and costs to surge, and yet Cornershop was unable to hire the people it needed to expand without regulatory clarity.
And yet, clarity was never less forthcoming since a new player had emerged on the Mexican regulatory scene. Another Mexican trust buster, IFT, which challenged Cofece’s jurisdiction over the case.
The internal dispute took months and Cofece came out on top, retaking the case.
Contxto contacted Cofece for comment, but we were politely rebutted since:
Cofece has yet to close the case. Therefore, it cannot legally comment on this matter.
Cofece
An answer that sticks to the letter of the law, but that no doubt undermines business confidence as much as it fuels uncertainty.
So, we were back to square one. However, it has now been over 10 months since Cornershop announced that a majority share of its stock would be acquired by Uber.
- Related article: Cornershop’s struggle with Uber acquisition
Uber and Cornershop recalibrate
It is now clear that for the two companies, enough is enough.
Luckily for them though, Chile’s anti-trust regulator, FNE, waved the union through, declaring that:
The transaction does not substantially reduce competition, and thus, cannot negatively affect either the terms of access, pricing, quantity, or quality of other last-mile delivery companies in Chile
FNE
Therefore, with at least that certainty in hand, the duo started to act increasingly in tandem. Gears clearly started whirring into action behind the scenes.
First, we got what could have seemed to be bad news: Cornershop’s erstwhile partner, Walmart, announced that it was discontinuing its distribution alliance with the scaleup.
The news seemed to balance out with relatively good news. A big Mexican supermarket chain, Soriana, jumped on board the distribution deal with the grocery app.
But this, it turns out was merely a prelude—and perhaps even Cornershop covering its Mexican bases—for its next big move.
On June 8th, news slowly trickled out that Uber was finally launching its grocery delivery service across over 20 cities. Some in Canada, some in the United States, but 19 in Latin America, specifically the cities covered by Cornershop.
All of Cornershop’s turf, except for Mexico…
Legal implications for Cornershop Mexico
Let’s take a step back.
Clearly Chile’s acquiescence is enough for the companies to have started integrating their services. But where does that leave Mexico? The Soriana deal is clearly a stopgap measure.
But, what if Cofece’s proceedings go on for longer than it takes for Uber and Cornershop to officially integrate?
Given Cofece’s precedent of not looking kindly on backroom deals, this is an important point. Just look at the fine it slapped on SoftBank and WeWork for doing just that.
Furthermore, what if Cofece goes ahead and actually says no? Would it require the Chilean-Mexican last-mile delivery app to become two separate entities? A Chilean subsidiary of Uber and an independent Mexican Cornershop?
The whole legal situation is murky and we won’t emit opinions until the relevant parties have made statements themselves.
Thus, Contxto has repeatedly tried to get confirmation from both Uber and Cornershop about how these legal proceedings would work. Details have not been forthcoming. However, a spokesperson for Uber did comment that:
After Chile’s FNE’s decision to approve the majority acquisition of Cornershop by Uber, it is expected that Uber’s investment into Cornershop will be occurring over the next few days.
Uber
This would be momentous news in itself, but I’m going even further than that and saying:
Even if a big handshake happens in a matter of days, this transaction is a done deal. The companies’ actions over the past week have only underscored that point.
Word on the inside…
The facts and the timing add up. If Cornershop’s CEO was saying the cash was to run out by December, the pandemic is in no way subsiding, and Cofece is not showing signs of life, then the move to push on with the union no matter what makes sense.
Therefore, I reached out to a source close to the company and was not all too surprised on hearing the revelation that, indeed, the Uber-Cornershop transaction is a done deal.
My source was incredibly frustrated at Cofece’s timewasting. The sentiment reflecting, no doubt, the feelings at the top of both companies.
It seems like patience has run out with Mexico’s byzantine regulatory system. The Uber-Cornershop union is going ahead, if it hasn’t already, with or without Mexico.
What will the ramifications of this be? We’ll keep you posted, but, if confirmed, it would be the elopement of the decade!
-AG
