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Its confirmed and official. The hugely speculated acquisition of Careem by Uber is now official with both companies releasing a statement on the same. The deal will have both cash and stock components, with Uber paying $1.4Bn upfront in cash and $1.7Bn in convertible notes. The deal is subject to regulatory approvals from 15 countries where Careem currently operates in.

According to the terms of the deal, Careem will become a wholly owned subsidiary of Uber, operating independently with its own brand and services. The company will retain the name, app, branding and everything else. The new business unit will be headed by Careem CEO Mudassir Sheikha. There will also be a new board that will be constituted with three representatives from Uber and two from Careem.

“This is an important moment for Uber as we continue to expand the strength of our platform around the world. With a proven ability to develop innovative local solutions, Careem has played a key role in shaping the future of urban mobility across the Middle East, becoming one of the most successful startups in the region.” said Uber CEO Dara Khosrowshahi.

The current deal, once closed, will be Uber’s biggest acquisition till date. It will also mark a major shift in the company’s overall strategy of operating in markets outside the US. While Uber has previously sold most of its major international units to local competitors, this will be the first time that the company is completely buying out a regional player.

The reason for such a pricey change in strategy could be multiple. For a first, MENA region as a whole has one of the highest levels of urbanization, reaching 66% penetration as compared with 34% in South Asia. The region also has a sizeable 600 Million population, a market big enough for Uber to scale.

Previously, Uber has sold off its business units in China, Russia among other markets. In both the countries, the company sold of the regional units in exchange for minority shareholding in rival companies.

For the Middle East, the acquisition will mark a crucial moment in the region’s business history. The largely oil-dependent economies in the region will now see technology as a lucrative sector to diversify into. Careem is a shinig example of possible tech businesses that the Middle East can build. It was valued at about $1 billion in a late 2016 funding round. With this, investor community too will be looking towards the Middle East for potential big-ticket investments in tech.

Both companies are expecting the transaction to close by Q1-2020.

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