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SAN FRANCISCO: The global company Uber Technologies will spend $ 3.1 billion on the acquisition of its competitor Careem, giving it a dominant position in a competitive region in anticipation of its IPO.
Uber said late Monday that it would pay $ 1.4 billion in cash and $ 1.7 billion in convertible notes under an agreement giving it full ownership of Careem. The long-awaited agreement puts an end to more than nine months of negotiations between the two companies and gives Uber a well-deserved victory after a series of divestments abroad.
The notes will be convertible into Uber shares at a price of $ 55, said Uber, marking a 13% increase over the Uber share price in its latest round of financing, led by SoftBank Group Corp. More than a year ago.
The acquisition makes Careem a 100% Uber subsidiary and will preserve the Careem brand and application, at least in the beginning. Careem co-founders Mudbadir Sheikha, Magnus Olsson and Abdulla Elyas will remain with Careem after the acquisition, the two companies announced.
However, the Careem Board will be reorganized: three seats will be allocated to Uber representatives and two to Careem. Sheikha, who is the CEO of Careem, and Olsson will sit on the board of directors. A spokesman for Uber declined to say who Uber would be appointing to the board.
The $ 3.1 billion cash and stock purchase buys all outside investors at Careem, companies announced, and Careem's shares will be converted into Uber shares. Careem had raised less than $ 800 million from investors and had raised $ 2 billion in October. Among its donors are German automaker Daimler, Chinese company Didi Chuxing, Japanese Internet company Rakuten Inc. and Saudi investor Kingdom Holding.
The transaction is expected to close in the first quarter of 2020, companies said, meaning it will not be counted in Uber's first quarterly earnings releases as a public company, even though it will probably the subject of a public publication. Uber will launch its IPO next month and should receive a valuation of at least $ 100 billion.
The agreement is subject to the approval of the supervisory authorities, including by the antitrust authorities of the countries in which Careem operates, which could prevent the transaction from progressing or require companies to change the terms.
The agreement is particularly important for Uber, whose ability to be a competitive global player has been questioned after selling its business in China, Russia and Southeast Asia to local rivals after heavy losses.
Uber chief executive, Dara Khosrowshahi, said in a statement that the agreement with Careem was "an important moment for Uber".
Uber was eager to reach an agreement before the company began its roadshow, where it will meet with public market investors before listing its shares on the New York Stock Exchange. The agreement allows Uber to claim a dominant position in a growing region because of its popularity outside the United States.
Uber operates in more than 70 countries, but faces strong rivals in Latin America and India and strict regulations in Europe.
Business talks have been going on for at least the past summer, sources told Reuters, though they did not get serious until the end of the year. Companies had been fighting for years in a driver competition that demanded discounts and subsidies and pushed prices artificially down.
Over the past year, Careem has rapidly expanded its business, adding a delivery service and almost doubling its value, forcing Uber to increase the price of its offering.
By the end of last year, Careem had attracted investor interest in another round of financing when Uber made an aggressive decision to buy the company, sources said.
Careem, founded in 2012, has a larger presence than Uber in the Middle East, North Africa, Pakistan and Turkey, operating in 98 cities nationwide, compared with about 23 locations.
"A Uber-Careem merger underscores the huge potential of the Middle East's auto industry," said Sam Blatteis, CEO of MENA Catalysts, a Middle East policy consulting and research firm.
The merger also follows Amazon.com's acquisition of Dubai-based electronics company Souq Group in 2017 for $ 580 million, according to a document filed by the US Securities and Exchange Commission. United States, highlighting the emerging Middle East technology scene. "This is the first" unicorn "release in the Middle East, and it is representative of what will come out of the Middle East," said David Chao, co-founder and general partner of venture capital firm DCM and investor of Careem, referring to start-ups valued at $ 1 billion or more.
Uber said its revenues last year rose to $ 11.3 billion, while its gross bookings of workshops rose to $ 50 billion. But the company lost $ 3.3 billion, excluding gains from the sale of its overseas business units in Russia and Southeast Asia.
Careem does not disclose its income.
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