Huge news coming in from China — a country where two of the world’s most valued upstarts, Uber and Didi Chuxing, are pouring in billions to maintain market lead in the huge ride hailing market there. The news ? Its Uber China merging with Didi Chuxing for a whopping $35 Billion.
Bloomberg (and now WSJ as well) reports that the dominant ride-hailing service Didi Chuxing will merge Uber’s chinese operations into its own. According to sources close to the development, the valuation of the combined entity has been considered close to $35 billion. The report further states that the deal entitles investors in Uber China — Uber, Baidu and others — a 20% stake in the newly formed combined entity.
Bloomberg has in fact got hold of a Travis Kalanick blog post, wherein he says,
As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart.
Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. 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.
The report also highlights the fact that Didi Chuxing has invested $1 billion in Uber at a $68 billion valuation. Post this massive merger deal, Uber will continue to operate using its own app in China, but there is no word on how the aforementioned merger will take place and what effect will it have, on Uber’s app.
The development also comes at the heels of the introduction of cab aggregations rules and guidelines in the country. China is set to legalise ca-hailing services starting November 1 this year, making way for a tech-enabled commute across country. Moreover, with this merger, Kalanick has made sure that he wouldn’t want to suffer at the hands of another country’s laws, as it has fighting the same in India.
Last week, reports came in that one Uber investor has had over 10 meetings with Didi shareholders. These shareholders apparently also wanted to ink a deal with the former. And the predictions now seem to be coming true after all.
The merger also points to the fact, that Uber has finally realized the worthlessness of pumping more money into its Chinese operations, and that it should merge with the biggest service rather than competing with it. This could also mark the end of yet another American company in China, which ultimately had to succumb to the local market leader and merge with the same. Unfortunately, we don’t see that happening here in India.
Both the cab aggregator services have a massive and flooded bank account, so you can easily imagine the monetary condition of the combined entity as a whole. Uber has recently added a massive $5.5 billion to its war chest in a matter of weeks. To fuel its rivalry with Didi, the company has recently closed a $3.5 billion equity round from Saudi Arabia’s Public Investment Fund.