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Uber’s merger with Grab in Southeast Asia lets it focus on core markets elsewhere

Uber
Image Credit: Tyrone Siu / Reuters

Uber’s great global consolidation exercise continues today with the news that the ride-hailing giant is merging its Southeast Asian operations with local etaxi rival Grab.

This news had been rumored for some time, but we now have more details of what the transaction entails.

Grab, for the uninitiated, is a Singapore-headquartered company with north of $4 billion in funding and notable backers that include SoftBank, Hyundai, and China’s Didi Chuxing. Similar to Uber, Grab offers a range of transport-focused services, including ride-hailing and ride-sharing, among other similar offerings. Grab currently operates in eight Asian markets — Singapore, Malaysia, Indonesia, the Philippines, Thailand, Vietnam, Cambodia, and Myanmar — and it’s in these regions that Uber is now ceding control to its rival.

Full terms of the merger haven’t been disclosed, but Uber has revealed that it will retain a 27.5 percent stake in the combined business, and its 500 employees across the region will now work for Grab.

This deal represents the third major consolidation for Uber. The San Francisco-based company sold its Chinese arm to local etaxi giant Didi Chuxing in a $35 billion deal back in 2016, which was followed by a merger with Yandex.taxi in Eastern Europe last year.

White flag

Uber has raised more than $20 billion in funding since its inception, and it is one of the most valuable technology startups in the world. However, its rivals in other markets have also raised big bucks and in many cases have also had a head start in terms of targeting customers locally. Just last month, Indonesia’s Go-Jek raised $1.5 billion from investors that included Google, Tencent, and BlackRock. Uber has been trying to fight too many battles on too many fronts, according to CEO Dara Khosrowshahi, and through consolidating with rival businesses, it can retain a strategic investment in lucrative markets while focusing its own resources elsewhere.

“This transaction now puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don’t,” Khosrowshahi said in an email to employees this morning.

So does this mean we can likely expect more consolidation in markets where Uber faces stiff competition? Perhaps, though Khosrowshahi is quick to pour cold water on that notion, stating that “organic growth” will be the company’s core mission moving forward.

“While M&A will always be an important value-creation tool for our company, going forward we will be focused on organic growth — growth that comes from building the best products, services, and technology in the world, and re-building our brand into the mobility brand that riders, cities, and drivers want to support and partner with,” he said.

It is worth keeping an eye on Latin America though: China’s Didi is currently preparing to launch in Mexico, while earlier this year it snapped up Brazil’s 99. This will likely emerge as a key battleground in the ride-hailing space, so it would not be too surprising if we saw further acquisitions and mergers happen across South and Central America as the race to hook riders intensifies.

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