After bruising China battle, Uber cedes to rival Didi

Mon Aug 1, 2016 5:57pm EDT
 
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By Heather Somerville and Denny Thomas

(Reuters) - After a bruising two-year battle, ride-hailing firm Uber is selling its China operations to bigger local rival Didi Chuxing in a deal that will give Uber a one-fifth stake in Didi.

The merged entity is worth around $35 billion - combining Didi's most recent $28 billion valuation and Uber China's $7 billion worth - said a source familiar with the matter who did not want to be named before the deal was made public.

Didi confirmed the agreement on its official microblog, but gave no valuation. In a posting on Uber's website, CEO Travis Kalanick said San Francisco-based Uber Technologies would have a one-fifth stake in Didi, making it the Chinese firm's biggest shareholder. Kalanick will join Didi's board, with Didi Chuxing chief Cheng Wei joining the Uber board.

Uber will continue to operate independently, the Didi posting said. "Cooperating with Uber will give the entire mobile travel industry a healthier order and a period of a higher level of development," it said.

China has been a challenging market for Uber, which has spent billions of dollars in a price war with Didi.

Both firms spent heavily to attract riders with discounts and both also raised billions in recent fundraisings. Uber is profitable in the United States, Canada and about 100 other cities.

In an internal message to staff viewed by Reuters, Kalanick wrote: "Sustainably serving China's cities, and the riders and drivers who live in them, is only possible with profitability. This merger paves the way for our team and Didi's to partner on an enormous mission, and it frees up substantial resources for bold initiatives focused on the future of cities - from self-driving technology to the future of food and logistics."

He said Uber was operating in more than 60 cities in China and "doing more than 150 million trips a month." Didi, however, claims 87 percent of the Chinese market for private vehicle ride-hailing.   Continued...

 
A mascot of Didi Chuxing is seen at the company's headquarters in Beijing, China, May 18, 2016. REUTERS/Kim Kyung-Hoon