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After months and months of rumors, it was finally confirmed that the giant Uber wanted to acquire its rival Careem in the Middle East under a $ 3.1 billion acquisition contract – including $ 1.7 billion in convertible notes and $ 1.4 billion in cash.
Uber writes that he expects the transaction to be finalized in the first quarter of 2020, pending the applicable regulatory approvals.
He says he will acquire all the benefits of Careem mobility, delivery and payment activities in the Greater Middle East region, noted from Morocco to Pakistan.
The main markets are Egypt, Jordan, Pakistan, Saudi Arabia and the United Arab Emirates, the company operating 120 cities in 15 countries in total.
Careem was founded as an Uber rival in 2012, but it has since diversified into offers such as food and parcel delivery, bus services and transfers, enhanced by clean acquisitions, such as RoundMenu and Commut (announced last year).
According to Crunchbase, the startup has raised nearly $ 772 million so far from investors like Kingdom Holdings, Saudi Arabia, Chinese giant Didi Chuxing and Japanese technology giant Rakuten.
The price paid by Uber for Careem is significantly higher than recent reports on its valuation. Last fall, when Careem raised a $ 200 million financing tranche, the company was valued at about $ 2 billion.
The value of the transaction also appears to be a record for a start-up in the technology sector in the Middle East, as well as among the most important for a merger and acquisition of mergers and acquisitions on a global scale. . (China, Didi, has disbursed more than $ 600 million for the Brazilian start-up 99 at the beginning of last year, valuing the Latin American regional activity at about $ 1 billion, for example.)
Commenting on the Uber-Careem acquisition in a statement, Dara Khosrowshahi, CEO of Uber I said:
This is an important moment for Uber, as we continue to develop the power of our platform around the world. With a proven ability to develop innovative local solutions, Careem has played a key role in the future of urban mobility in the Middle East, becoming one of the most successful startups in the region. Working closely with the founders of Careem, I am confident that we will achieve outstanding results for runners, pilots and cities in this fast-changing part of the world.
Mudassir Sheikha, CEO and co-founder of Careem, said in another statement:
Joining forces with Uber will help accelerate Careem's goal of simplifying and improving people's lives and creating an impressive and inspiring organization. The mobility and wider Internet possibilities in the region are massive and untapped and could make our region leap towards the digital future. We could not have found a better partner than Uber under Dara's leadership to seize this opportunity. This is a pivotal moment for us and the region, which will serve as a catalyst for the region's technological ecosystem by increasing the availability of resources for aspiring entrepreneurs from local and global investors.
At the close of the operation, Careem will become a wholly owned subsidiary of Uber and will continue to operate under its own brand, Sheikha leading the business of Careem.
Under Uber's leadership, Careem will report to its own board of three Uber representatives and two Careem representatives, Uber added.
There is currently some overlap in the functioning of regional markets. It remains to be seen whether the two brands will continue to be present indefinitely in cities such as Cairo or Casablanca – or if Careem will eventually prevail as a select brand for the Middle East and Pacific markets. # 39; Asia.
A spokeswoman for Uber told us: "Nothing changes until the closing of the transaction in the first quarter of 2020, in accordance with regulatory approval. Subsequently, we will operate as two distinct brands in all the markets in which we operate. "
At first, it seems that there is no plan to make major changes in the market, Uber emphasizing that the pair operate their respective regional services as well as independent brands. It is possible, however, that this is intended to reassure regulators that fusion and innovation will not suffer. (Even though any brand difference will only be a mirage at the top of a merged company within the system.)
Uber describes the acquisition as a marriage between "global leadership and technical expertise with Careem's regional technology infrastructure and proven ability to develop innovative local solutions," suggesting that the acquisition will allow the pair to offer 'various mobility, delivery and payment options', while strengthening the 'large-scale' regional transport infrastructure.
"This will accelerate the delivery of digital services to local residents through the development of a consumer super-application offering services such as Careem's digital payment platform (Careem Pay) and the last mile distribution (Careem Now), "he suggests further.
Uber also claims that the acquisition will contribute to the expansion of the "variety and reliability" of the services offered, touting a "wider price range" for consumers attracted by noise, while asserting that those driving for both brands should expect an increase in the number of trips. growth and "enhanced services" that she believes will lead to better work opportunities and "higher and more predictable incomes" by making better use of drivers' time.
Although, it looks like it would not be. And it remains to be seen how the consolidation of two regional competitors will have a positive impact on, for example, the consumer prices of such services by consumers in the region.
In a note to Uber staff, obtained by CNBC, Khosrowshahi described the move as a "big leap" for Uber, highlighting the strong growth of markets such as Pakistan and other recent developments such as the opening of the Saudi Arabia to women drivers. Regional sails
What is not mentioned in the memo, it is the stricter regulatory regime that Uber companies are facing in Western markets, where a series of legal challenges and a close scrutiny of the On the other hand, decision-makers have imposed changes in its mode of operation that increase costs for the company, such as the free insurance couriers Uber developed in Europe last year.
It was also decided to diversify its activities and to go from one horizon to the planning of a multimodal mix including micro-mobility services (acquisition of the start of the electric bike Jump l & # 39, last year) as cities tightened their congestion and pollution policies, and young urban consumers in temperate climates look for alternatives to the hip to call a car.
On the other hand, the oil-rich Middle East, with a more flexible regulation and mild temperatures that naturally favor air-conditioned transport, is probably as close as possible to the ideal market conditions for helicopters in general, and so offers -being a more reliable application base. for Uber, a company that still has cars at its base.
Regarding the structural decision to allow Careem to retain an independent brand and operate separately, Khosrowshahi writes in the memo that he was chosen after a "careful review".
"[W]We decided that this framework had the advantage of allowing us to build new products and try new ideas among not one, but two strong brands, with powerful operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, reduce wait times, develop new products such as high-capacity vehicles and payments, and accelerate the already remarkable pace of innovation in the region, "he added that he expects" very little "change in the daily activities of both teams after the close, the two companies" continuing to operate largely part separately after the acquisition ".
The decision to exploit the two brands was also the strategy used when China, Didi Chuxing, decided to buy Uber's activities in China in 2016.
Another element is Uber's long IPO – which would eventually take place next month.
Bagging Careem now offers Uber some fuel for growth that it wants to be able to present to potential shareholders before becoming public – out of tune to offset the heavy losses that its business continues to suffer every quarter.
More recently, Uber reported $ 3 billion in the fourth quarter of 2018 with net losses of $ 865 million – the latter benefiting from a tax benefit that allowed it to not record a net loss of $ 1.2 billion. dollars during the period.
While, on an annual basis, its revenues were $ 3 billion in 2018 and losses were $ 1.8 billion, compared to $ 2.2 billion in 2017, the difference is reduced to a minimum.
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