Both America’s Uber as well as China’s Didi Chuxing have now confirmed that the latter has agreed to buy the former’s Chinese business operations. The move has been fueled by the idea of taking two unprofitable cab aggregation businesses and merge them as one entity.
The official blogpost mentions that,
In exchange for the UberChina assets, Uber will receive 5.89% of the combined company with preferred equityinterest which is equal to a 17.7% economic interest in Didi Chuxing. In addition, Baidu and other Chinese shareholders will receive a 2.3% economic interest in Didi Chuxing.
Under the agreement, Didi Chuxing will also obtain a minority equity interest in Uber.
This buy-out also sees Cheng Wei, founder and chairman of Didi Chuxing and Travis Kalanick, founder of Uber join Uber’s and Didi’s board respectively. It also details that Uber China will maintain independent branding and operate separately, however, Didi says that it will integrate the managerial and technological experience and expertise of the two teams.
Cheng Wei, founder and CEO of Didi Chuxing, said,
Didi Chuxing and Uber have learned a great deal from each other over the past two years in China’s burgeoning new economy. As a technology leader deeply rooted in China, Didi Chuxing is constantly pushing the frontier of innovation to redefine the future of human mobility. This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.
With regard to the buy-out, Didi Chuxing will now work with regulators, peers and stakeholder groups to continue educating the market to build a healthy environment for cab aggregators. The company will also help Uber fall in line with with the recent cab aggregation rules and guidelines put forth by the Chinese government.
Travis Kalanick believes that Uber and Didi will be stronger together and in the blogpost adds that,
However, 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.
Kalanick also adds that within two years of operation, the company has reached a milestone of a staggering 150 million trips a month. This is no small feat, and if you see the billionth ride of the company — it was tied between 147 rides and 54 of them were booked in China. Kalanick in his blogpost also adds that China is an amazing country with immense opportunity, and the aim of the merger of the two companies is to make ”Transportation as reliable as running water, everywhere for everyone”.