Uber Technologies Inc. has confirmed plans that it will be selling off its Southeast Asian operations to Grab and in turn it will garner a 27.5 per cent stake in a combined entity.
The sell off is a result of the decision by the two companies to end a war of attrition that has been affecting both the companies. Under the agreement, Grab will acquire all of Uber’s operations in a region of 620 million people, including food delivery service UberEats.
Uber in turn will receive a 27.5 per cent stake in a combined entity and its chief executive officer Dara Khosrowshahi will join the board of the Singapore-based company.
The cease-fire marks a victory for Grab as well as SoftBank Group Corp., the biggest shareholder in both companies. Masayoshi Son’s firm is pushing to reduce competition in a Southeast Asian ride-hailing market forecast to reach $20.1 billion by 2025.
Uber and Grab, together with two other SoftBank-backed ride-hailing firms — India’s Ola and China’s Didi Chuxing — provide about 45 million rides a day, according to SoftBank presentation material in February.
As far as Uber is concerned, the pull out from the region could help it cut losses ahead of a planned initial public offering in 2019. But this is yet another region from where Uber has pulled off. First it was China in 2016 and a deal in Russia in 2017.
“Today’s acquisition marks the beginning of a new era. The combined business is the leader in platform and cost efficiency in the region,” Grab CEO Anthony Tan said in a statement.
Uber CEO Dara Khosrowshahi has been pushing to burnish the financials of a company that’s burned through $10.7 billion since its founding nine years ago.
Khosrowshahi signalled during a trip through Asia last month that he’s committed to other key markets such as Japan and India. But its latest exit suggests Uber is more than ever dependent on its home market of North America, not unlike Khosrowshahi’s previous US-centric employer, Expedia Inc.
For Grab’s Tan, the truce brings to an end a bruising battle for leadership in Southeast Asia.
Grab, which started out as a taxi-hailing app in Kuala Lumpur in 2012, became the region’s dominant ride-hailing service in past years with $4 billion raised from investors. It was most recently valued at $6 billion, according to CB Insights. Today, with more than 86 million mobile app downloads, it offers a wide range of ride-hailing services in 191 cities across Singapore, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, Myanmar and Cambodia.