Uber sells it’s China operations to Didi Chuxing
US taxi service Uber has sold its business in China to the dominant ride-hailing service in the country Didi Chuxing. The $35 billion deal will end heated competition between the two firms.
Didi will buy Uber’s brand, business and data in the country, the Chinese company said in a statement. Uber Technologies and Uber China’s other shareholders, including search giant Baidu Inc., will receive a 20 percent economic stake in the combined company. Didi founder Cheng Wei and Uber Chief Executive Officer Travis Kalanick will join each other’s boards.
Under the terms of the merger, Didi will make a $1 billion investment in San Francisco-based Uber which operates globally outside China. Uber China’s investors will get a 20 percent stake in the new company.
Didi CEO Cheng Wei said the two companies “We have learned a great deal from each other over the past two years in China’s burgeoning new economy.”
“Uber and Didi Chuxing are investing billions of dollars in China, and both companies have yet to turn a profit there,” Travis Kalanick, chief executive officer of Uber, wrote in a blog post obtained by Bloomberg. “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,” he added.
The deal is subject to government approval. While the combination of the top two players in a market would often raise regulatory scrutiny, officials will have to determine the range of competition. “The ministry of commerce has to define the size of the market and see if the car-hailing business Didi and Uber are offering can be replaced by similar services,” said Deng Zhisong, senior partner at Beijing-based law firm Dentons.
After the merger, Didi will count all three of China’s biggest technology companies as shareholders—online shopping Alibaba Group HoldingLtd, gaming-to-social leader Tencent Holdings Ltd. and Baidu.