Uber buys Mideast rival Careem in US$3.1 billion deal

March 27, 2019 07:14
The Careem deal will give Uber dominance in the Middle East ride-hailing market ahead of its hotly anticipated IPO. Photo: Bloomberg

Global ride-hailing firm Uber Technologies will spend US$3.1 billion to acquire Middle East rival Careem, buying dominance in a competitive region ahead of a hotly anticipated initial public offering, Reuters reports.

Uber said it would pay US$1.4 billion in cash and US$1.7 billion in convertible notes in a deal that gives it full ownership of Careem.

The long-expected agreement ends more than nine months of start-and-stop negotiations between the two companies and hands Uber a much-needed victory after a series of overseas divestments.

The notes will be convertible into Uber shares at a price equal to US$55 apiece, Uber said, marking a nearly 13 percent increase over Uber’s share price in its last financing round, led by SoftBank Group more than a year ago.

The acquisition makes Careem a wholly owned subsidiary of Uber and will keep the Careem brand and app intact, at least initially.

Careem co-founders Mudassir Sheikha, Magnus Olsson and Abdulla Elyas are staying on with Careem following the acquisition, the companies said.

However, Careem’s board will be overhauled, with three seats going to Uber representatives and two belonging to Careem.

Sheikha, who is Careem’s chief executive, and Olsson will have board seats. An Uber spokesman declined to say whom Uber would appoint to the board.

The US$3.1 billion cash-and-stock purchase buys out all external Careem investors, the companies said, and Careem stock will be converted into Uber equity.

Careem had raised less than US$800 million from investors and as of October had a US$2 billion valuation.

Its backers include German car maker Daimler AG, Chinese ride-hailing company Didi Chuxing, Japanese internet company Rakuten Inc and Saudi investor Kingdom Holding Company.

The deal is expected to close in the first quarter of 2020, the companies said, meaning it will not be reflected in Uber’s first couple of quarterly earnings releases as a public company, although it will likely be disclosed in a public IPO filing.

Uber will kick off its IPO next month and is expected to receive a valuation of at least US$100 billion.

The agreement is subject to regulatory approval, including by antitrust officials in the countries where Careem operates, which could prevent the deal from moving forward or compel the companies to modify the terms.

Careem, founded in 2012, has a larger presence than Uber in the Middle East, North Africa, Pakistan, and Turkey, operating in 98 cities there compared with Uber’s roughly 23 locations.

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