Uber Throws In The Towel: Sells Money Losing Chinese Operation To Local Competitor Didi Chuxing
Concluding a vicious, money-losing ridesharing price war in China, overnight Didi Chuxing, the dominant ride-hailing service in China, announced it would acquire Uber’s operations in the country, ending a battle that cost the two companies billions as they competed for customers and drivers.
As reported early in the overnight session, Didi said it would Uber’s brand, business and data in the country. Uber will receive 5.89% of the combined company with preferred equity interest equal to 17.7 percent of the economic benefits. According to the Didi statement, Uber China’s other shareholders, including search giant Baidu Inc., will get 2.3% of the economic interest in Didi Chuxing. Didi founder Cheng Wei and Uber Chief Executive Officer Travis Kalanick will join each other’s boards.
After the merger, Uber will become the largest shareholder in Didi. The Chinese ride-hailing company will also invest $1 billion in Uber as part of the deal, a person familiar with the matter said.
As Bloomberg reports, “the truce brings to an end a bruising battle between the two companies for leadership in China’s fast-growing ride-hailing market. Uber has been spending at least $1 billion a year to gain ground in China, while Didi offered its own subsidies to drivers and riders to build its business.”
‘Didi Chuxing and Uber have learned a great deal from each other over the past two years,’ said Cheng, who is also CEO, in the statement. ‘This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.’
This post was published at Zero Hedge on Aug 1, 2016.