Uber’s China business would be taken over by rival Chinese ride-hailing service Didi Chuxing. This announcement was made by both the companies on Monday. The combined company would be valued at $35 billion according to a person familiar with the matter, reports media.
With “preferred equity interest” which is equal to a 17.7 percent stake, Uber global will receive 5.89 percent in the combined company. Taking the stake in combined company to 20 percent, a 2.3 percent stake in Didi Chuxing would be received by Baidu and Uber’s other Chinese shareholders.
$7 billion value for Uber China and the $35 billion makes up Didi’s latest $28 billion valuation. Uber declined to comment on the valuation when contacted by various media following the announcement.
The board of Uber would be joined by the start-up’s founder and, Chairman Cheng Wei, an official statement from Didi said. Uber Chief Executive, Travis Kalanick, will join the board of Didi.
Didi, China’s largest ride-hailing service, has been a fierce rival of Uber an dthe two companies have been locked in an intense battle in the country. Sources said that as Uber tried to get ahead in the market, the U.S. start-up has lost $2 billion over two years in China.
To “ensure stability and continuity of service for passengers and drivers”, Uber China will keep its independent branding and business operations under the agreement. The “managerial and technological expertise” of the two companies would also be integrated by Didi.
The chance of expanding beyond China and into new markets would be opened up to Didi with the deal.
“Didi Chuxing will also continue to expand its international strategy. We look forward to working with our partners at home and abroad to create more value for drivers, passengers and communities,” Jean Liu, president of Didi Chuxing said in a statement on Monday.
Both Uber and Didi have been spending billions of dollars in China but neither have been profitable, believed to have been said by Kalanick in blog post believed to have been written by Kalanick which the Chinese news outlets and social media sites were circulating.
“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.
“I have no doubt that Uber China and Did Chuxing will be stronger together,” Kalanick said in the post as quoted by Chinese reports. However the validity of the post is yet to be confirmed by neutral sources.
In a move last week by the Chinese government that was welcomed by both Didi and Uber, the authorities laid out new rules that legalized ride-hailing apps.
The merger of China’s two largest ride-hailing apps in early 2015, Didi Dache and Kuaidi Dache, resulted in the formation of DidiChuxing – which in Chinese literally translates into “honk honk, commute” and was previously known as Didi Kuaidi.
Apple is an investor in the company and it recently closed a financing round worth $7.3 billion.
(Adapted from Bloomberg)