Uber China to merge with archrival Didi Chuxing

Posted on Posted in 2016 Business Opportunities For You, What's Trending Now

 

Uber Technologies Inc. will sell its China business to Didi Chuxing, the dominant ride-hailing service in the country, according to people familiar with the matter. The rumor has being doing the rounds for around a month now, with both sides denying but it looks like a deal is happening. The deal ends a costly battle between the two companies, which competed for customers and drivers.

The deal will see Didi, which has more than $7 billion in cash on hand after extensive fundraising, invest $1 billion into Uber’s global business for Uber China’s operations. In exchange, Uber China and its investors, which include Baidu, will take a 20 percent stake in the newly-merged entity in China. Uber China was most recently valued at $7 billion, Didi’s most recent valuation was $28 billion.

This deal means that Didi is now invested in every ride-sharing company of size on the planet, having previously put money into Lyft, Ola in India and Grab in Southeast Asia.

 

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This is not the first mega-merger in China’s ride-hailing space. Didi Chuxing itself was created when Didi Dache and Didi Kuaidi called a truce on their capital intensive subsidies war in a merger last year that was valued at around $6 billion.

Uber has spent billions in China, but is losing $2 billion in the country to date, so it looks like the same reasons are behind this second merger deal, albeit that the potential repercussions are very different. Offloading its Chinese unit could put Uber on track to finally list as a public company. The U.S. firm said last month that it is already profitable in Western markets and with China, its biggest money-drainer and weakest market from a competitive standpoint, a major question mark around its business will be removed if this deal goes through.

 

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