Uber will receive 5.89 percent of the combined company with preferred equity interest, which is equal to a 17.7 percent economic interest in Didi Chuxing, according to the deal.
Advertisement
Didi Chief Executive Cheng Wei will join Uber’s board of directors, and Uber Chief Executive Travis Kalanick will be part of the board of Didi Chuxing.
Uber is merging its business in China-UberChina-to market competitor, Didi Chuxing.
Uber has reportedly lost billion in China already and was spending about $1 billion each year trying to capture more of the market.
Both firms were “investing billions of dollars in China and both companies have yet to turn a profit there”, he added.
The new entity’s US$35 billion (S$47 billion) market capitalisation is made up of Didi’s most recent valuation of US$28 billion and Uber China’s US$7 billion valuation.
Uber launched in China in 2013, and its operations have since expanded to roughly 60 cities. The timings of the announcement however follows on the heels of China legalizing ride hailing apps nationwide.
On the other hand, Uber China is backed by Baidu.
Uber China will keep its branding in the country, but Didi Chuxing will integrate the two companies’ technology and management.
The merged company Didi Chuxing brought together backers Alibaba and Tencent Holdings, the country’s most valuable internet businesses. Didi Chuxing operates in 400 cities and completed 11 million rides a day in the first quarter of 2016.
The decision to sell Uber China to Didi is nonetheless something of a capitulation for Uber in its battle for dominance in China.
Advertisement
Uber China had “exceeded even my wildest dreams” as “most US technology companies struggle to crack the code there”, he said. In June, Didi closed a $7.3 billion financing round that included investment from the U.S. technology giant Apple and the world’s largest e-commerce platform Alibaba. However, with the government passing a new rule last week legalising ride-hailing services, this may well be the beginning of the road to profitability for Didi Chuxing. In February, Kalanick told BetaKit.com that its losses there exceeded $1 billion per year.
