Yelp shares soar with Grubhub sale

FILE PHOTO: The Yelp Inc. logo is seen in their offices in Chicago, Illinois, March 5, 2015. REUTERS/Jim Young/File Photo

SAN FRANCISCO (Reuters) - Shares of Yelp Inc YELP.N jumped more than 27 percent on Friday, a day after the company announced the sale of its Eat24 business to Grubhub GRUB.N.

As part of the $287.5 million sale, Yelp and Grubhub will enter into a five-year partnership that will integrates Eat24 with Grubhub’s food ordering service. The deal allows Yelp, which specializes 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 $200 million share repurchase program, 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.

Shares were trading at $39.66 in mid-afternoon.

Yelp’s second-quarter revenue rose 20 percent to $209 million, above the $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 GRPN.O OrderUp delivery service, which focuses on college campuses, and in June it bought Foodler, a Boston delivery service.

Grubhub shares were up 9.5 percent on Friday.

Reporting By Marc Vartabedian; Editing by Bill Trott