Uber has stepped back from a costly battle for the Chinese ride-hailing market and agreed to sell its operations there to rival Didi Chuxing.
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Didi will buy Uber China in a deal that values the combined company at 35 billion USA dollars, in which Uber China will hold a 20 percent stake, according to Bloomberg on Monday, citing sources familiar with the matter.
Fitch Ratings noted on Sunday that as new regulation also will bar companies from undercutting each other, it is unclear “if Chinese consumers, having grown accustomed to heavily subsidized rides, would be willing to pay higher fares”.
Uber and investors in its Uber China unit will take a 20% stake in Didi, and it will be its largest shareholder, Rick Carew, Alyssa Abkowitz and Eva Dou report for the Wall Street Journal. Uber will receive a stake in Didi Chuxing and Uber founder Travis Kalanick will join the Chinese company’s board while Didi Chuxing founder Cheng Wei joins the Uber board, it said. Both companies have spent tens of millions of dollars in China to attract users in the past year.
The deal between the pair – which have been spending heavily to gain market share and battling fiercely for passengers – is almost complete and could be announced as early as Monday, said the source, who declined to be identified because the deal is not yet public. Combined with Uber’s China business that was valued at around $8 billion, Didi will have a valuation of around $36 billion.
This merger “frees up a substantial resources for bold initiatives focused on the future of cities-from self- driving technology to the future of food and logistics”. Apple’s investment just got better with Didi Chuxing now buying out Uber’s business in China.
The acquisition is likely to increase competition in the booming Chinese market. This competent plays the dominant role in ride-hailing services in the country.
Uber will continue to operate its own app in China for now.
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Didi Chuxing is a partnership between homegrown firms Didi and Kuaidi, which joined forces a year ago. That included $1 billion from Apple Inc., which became a strategic investor alongside Tencent and Alibaba.
