Uber Technologies will soon be free of their China unit as China’s dominant car-hailing company Didi Chuxing – which received a $1 billion validation in the form of an investment from Apple Inc. earlier this year – enters into a merger agreement to acquire all of Uber’s assets in the People’s Republic.
The sale of Uber’s Chinese assets marks a turning point in the company’s losing battle in the country. To date, Uber has lost nearly $2 billion attempting to take market share away from Didi, but investors have been putting pressure on the company to go through with the sale.
As part of the merger deal, Didi will get all of Uber’s data and business, as well as rights to the branding, and Uber Technologies – along with Baidu, an Uber investor – will receive 20% of the resulting merged entity, which is expected to have a valuation of $35 billion.
Founder and CEO of Uber, Travis Kalanick, wrote this in a blog prior to the deal being announced:
“As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. I have no doubt that Uber China and Didi Chuxing will be stronger together.”
On the other side of the deal is Didi CEO Cheng Wei, who said:
“Didi Chuxing and Uber have learned a great deal from each other over the past two years. This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.”
For Didi, this opportunity has come at the right moment, since China recently legalized car-hailing. This validation will allow the company to expand aggressively and wipe out the competition, practically.
Didi merged with Kuaidi last year to fend off competition from Uber. The resulting company – Didi Chuxing – received backing from two of the largest corporations in China – Alibaba and Tencent – as well as the investment from Apple, bringing the company’s valuation to around $28 billion. At a post-Uber-merger valuation of $35 billion, Uber’s China assets are valued at around $7 billion.
Although the company has been profitable in its core markets in North America until now, it has been the loss factor in emerging markets that has kept Uber from successfully going to an IPO. Now that the path has cleared, we may soon see an announcement about the company going public.
With part of a 20% stake still retained by the company post the merger, this will give them considerable upside when they do go public. At last count, Uber’s valuation came in at around $68 billion.
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