Uber is selling its China operations to rival Didi Chuxing, a landmark deal that ends the ride-hailing company’s quest to dominate one of the world’s largest markets.
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Once finalized, Uber China’s investors will own a 20 percent stake in the merged company, which is expected to be worth approximately $35-billion due to the combined valuation of Uber China and Didi Chuxing.
Uber’s CEO Travis Kalanick and Didi founder Cheng Wei will work together and join each other’s boards. Uber’s Chinese operations were valued at some $8 billion dollars, making Didi’s new market valuation at around $36 billion – a figure still almost half that of the San Francisco-based ride sharing company.
Uber, which has been spending hugely in China over the last two years, has appeared to have folded, striking a deal in which is will merge its operations with its main rival there, Didi Chuxing.
In an internal message to staff viewed by Reuters, Mr Kalanick wrote: “Sustainably serving China’s cities, and the riders and drivers who live in them, is only possible with profitability”.
Separately, The Wall Street Journal reported that Didi will also invest $1 billion in Uber at a $68 billion valuation as part of the deal.
Finally, a combination of Uber’s Chinese operations with Didi Chuxing just “makes complete sense” as the rivalry between the companies was “terrific” for riders and drivers, not so much for the companies investors.
Didi consolidated local competition, forming from a merger of China’s top two ride-hailing firms, and it had the backing of China’s top Internet companies Alibaba Group (BABA.N) and Tencent (0700.HK).
The Chinese ride-hailing company company said in June it has close to 15 million registered auto owners and drivers, serving about 300 million users, with a wide range of mobile technology-based transportation options.
Indeed, Kalanick said this merger frees up “substantial resources for bold initiatives focused on the future of cities-from self-driving technology to the future of food and logistics”. Uber has lost more than $2 billion in the country, people familiar with the matter said.
Still, Didi made moves that may serve as a guide for other Uber competitors on its way to building a juggernaut that gives customers more than 14 million rides each day.
The company is backed by Chinese internet giants Tencent and Alibaba, and has also invested in Uber’s rival U.S. taxi-booking service Lyft.
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Last September, Didi Chuxing and Lyft of the United States agreed to link their services to allow travelers to use them in each other’s markets.
