Uber to sell China subsidiary to rival Didi in $35 bn deal
02 August 2016
Uber Technologies Inc., the car-hailing app giant, is selling its China subsidiary to its biggest local rival Didi Chuxing in a $35 billion deal that will give Uber a minority stake in the company.
The deal is valued at $35 billion by merging Didi's $28 billion valuation and Uber China's $7 billion valuation, according to analysts.
Under the terms of the deal, Didi will invest $1 billion in Uber and receive Uber's brand, business and data in the country, while Uber China's investors will get a 20-per cent stake in the merged company.
Uber will receive 5.89 per cent of the merged company, while Uber China's shareholders, search giant Baidu, will get 2.3 per cent of the economic interest in Didi Chuxing. Didi founder Cheng Wei and Uber CEO Travis Kalanick will join each other's boards.
Uber had been losing to Didi which has a nearly 80-per cent market share, and had been spending around $2 billion since the past two years trying to catch up with Didi.
Kalanick is reported to have earlier said that it was an unsustainable way to run the China operations, which he acknowledged in a blog post circulating around Chinese social media.
"Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term," Kalanick said.
With China out of the way, Uber can now focus on other countries where it's fighting for market share, such as Grab in Southeast Asia, Ola in India and Lyft in the US.
Uber, based in California, recently pledged to invest at least $1 billion into its Indian operations to compete with Ola, which had just raised $400 million. Uber has expanded from 22 Indian cities to 27 while Ola is already operating in 102 cities.
Cheng Wei, founder and CEO of Didi Chuxing, said, ''Didi Chuxing and Uber have learned a great deal from each other over the past two years in China's burgeoning new economy. As a technology leader deeply rooted in China, Didi Chuxing is constantly pushing the frontier of innovation to redefine the future of human mobility. This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level. ''
Didi has over 15 million drivers and 300 million registered users in a still-fledgling rideshare market of 1.3 billion people in China.
In June last year, Didi estimated that it would spend $12 billion annually on its platforms and plans to serve 30 million passengers daily with 10 million drivers within three years.
It recently teamed up with Lyft so that its Chinese customers visiting the US could use Lyft's services.