I can't tell if this is a good deal for Uber investors or not. As I understand it, Uber will own a 20% share in the combined company. The combined company is valued at $35 billion, so Uber's share of the value will be $7 billion (actually less, since they also need to share it with Baidu which invested directly into Uber China too). $7 billion doesn't sound too bad as an exit.<p>However, if Uber's China business is worth only $7 billion, and their current valuation is $68 billion, does that mean the rest of the world is worth 9x China, even though China is one of their largest and highest potential market? Suddenly the valuation of Uber's business outside China looks very inflated (even more than before). Doesn't it?
Jean Liu, the president of Didi, is the daughter of Chinese businessman and Lenovo founder Liu Chuanzhi, and the granddaughter of Liu Gushu, a senior executive banker at the Bank of China.<p>Travis Kalanick is not.
Back in 2014, Didi and Kuaidi, the other big ride-hailing service in China, had a price war. This forced 20 smaller ride-hailing companies out of business. In 2015, Didi and Kuaidi merged.[1] They managed to escape antitrust review by claiming their revenue was below the $65 million threshold for antitrust reporting in China. With their price war, they were both losing money, so the deal was not subjected to antitrust review by the Ministry of Commerce. Unclear if the Uber deal will get through the same loophole. Anyway, Uber exits from China, with a minor stake in Kuaidi. Now Kuaidi can jack up prices.<p>[1] <a href="http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/oct15_sobel_10_19f.authcheckdam.pdf" rel="nofollow">http://www.americanbar.org/content/dam/aba/publishing/antitr...</a>
Well played by Didi. This was a years-long chess game with enormous stakes and Didi came out winning. Make no mistake, Uber's goal was absolutely to dominate in China, if they could. That was a big part of their pitch to investors over the past two years. This deal is an admission of defeat and a retreat from competition, salvaging what value they could in the process.<p>I would imagine this speaks to mounting pressure on Uber to begin producing real profits. If so, expect many changes in the coming year+ as the company's unit economics (outside its usurious car leases) are clearly still abysmal in almost all markets.
The articled linked has changed the title to:
"Uber to Sell China Business to Rival Didi After Losing Billions"<p>This is a more accurate title being used by major news media:<p>"Uber sells Chinese business to Didi Chuxing"
- <a href="http://www.bbc.com/news/36938812" rel="nofollow">http://www.bbc.com/news/36938812</a><p>"Didi Chuxing to Buy Uber’s China Operations"
- <a href="http://www.wsj.com/articles/china-s-didi-chuxing-to-acquire-rival-uber-s-chinese-operations-1470024403" rel="nofollow">http://www.wsj.com/articles/china-s-didi-chuxing-to-acquire-...</a><p>It is also being used in Didi's official Weibo (in Chinese):
<a href="http://weibo.com/2838754010/E1ykp4eJn?refer_flag=1001030101_&type=comment#_rnd1470045164071" rel="nofollow">http://weibo.com/2838754010/E1ykp4eJn?refer_flag=1001030101_...</a>
For people living in Beijing, this is really a bad news.<p>Didi and Uber China have been in fierce competition for quite a long time, both of them gave consumers HUGE discount. For example, Uber is showing me a promotion which I can go as far as 5 KM around at the cost of just 5 RMB (0.75$).<p>After merging, I'm afraid we won't see such a low price anymore.
"Didi is making a $1 billion investment in Uber at a $68 billion valuation, people familiar with the matter said."<p>So that's where Apple's $1 billion in Didi[1] just went!<p>[1] <a href="http://www.reuters.com/article/us-apple-china-idUSKCN0Y404W" rel="nofollow">http://www.reuters.com/article/us-apple-china-idUSKCN0Y404W</a>
Uber finally threw up the white flag in its fight against Didi in China. I wonder how big of a dent this puts in Uber's sheen of invincibility in other markets. Will investors be braver backing other regional competitors like Ola in India and Lyft in the US?
From bbc.com:<p>"The deal with Didi Chuxing comes just days after China agreed to provide a legal framework for taxi-ordering apps.
Both Uber and Didi have welcomed the decision, having previously operated in a legal grey area in the country.
While the apps are widely popular, they have undermined business for normal taxis and have been met with protests by cab drivers.
The new rules will take effect on 1 November and will, among other things, forbid such platforms to operate below cost."<p>New regulation prohibits ride subsidizing. Meaning no way for Uber to increase its market share by subsidizing rides after November 1st.
Is there no antitrust law in China? Surely the optimal solution to two big corporations hemorrhaging money in competition for consumers is not that they stop competing, but rather that they cut costs. Or is such a scenario simply not possible in the dog-eat-dog tech world?
> “Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”<p>Hm. This makes me wonder if their strategy for doing that is price fixing. The merger lets them do that legally.<p>Are there any other serious players in the market in China?
I realize this is a complex deal with many nuances but do elements of all of this not sound a little bit like a ponzi scheme? At least outwardly? Didi which itself has lost billions dollars so far has agreed to invest a billion dollars into another company who has lost billions of dollars. I guess investors are that confident that Uber can not and will not fail?
Seems like a risky move. My understanding is that China doesn't have the same level of minority shareholder protections as Delaware. I suppose it's better than bleeding for the next 10 years and ultimately losing the market, though.
This is pure monopoly play - I hope Lyft continues to compete and do not merge ... I hate to be in world where no taxi service exists and I am at the mercy of random surge pricing...
Uber was never going to win as a foreign tech company in China. Good thing they are doing this, at least they get a piece of the pie the only way you can in China - as an investor.
Strange, since a couple months ago Didi, Lyft and Ola (Indian incumbent) launched a collaborative service …<p><a href="https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launching-cross-platform-service-this-week-in-u-s/" rel="nofollow">https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launc...</a><p><a href="https://techcrunch.com/2015/12/03/lyft-didi-ola-and-grabtaxi-partner-in-global-tech-service-alliance-to-rival-uber/" rel="nofollow">https://techcrunch.com/2015/12/03/lyft-didi-ola-and-grabtaxi...</a>
>chief executive of Uber wrote in a blogpost obtained by Bloomberg.<p>You mean obtained it, like it isn't available to the general public or something? Did they let you make a copy or was it FYEO?
So much for "disruption" in startup ideology, but I guess it is China that starts bring them back to reality. This is China, nothing is fair even you optimistically believe it to be.<p>I'm not sure what's the fantasy on China. I'd personally prefer winning the 6b population markets over the 1.3b.<p>Sure, it takes time, but in a long run it is more sustainable. But obviously in a startup world, a sustainable business without the hyper-growth is not much valued.
It is interesting to note the Apple investment in Didi just a few months back. Did that in any way play a role in this merger? I think this is a good outcome given the consideration that Uber, an american company cannot own something as fundamental as transportation in China. The government plays too much of a role to let Uber or for that matter any other foreign company. Listen to Trump on this one!
How did Uber get 17.7% of Didi (88% of Uber China shares) if they didn't own more than 50% of Uber China to begin with?
Also, it was reported that Uber got 17% of economic interest, but only 5.89% of full equity? I assume the rest of the 17% was non-voting shares?
If you can't beat 'em, join 'em. I think uber's playbook of encouraging local activism to overcome govt and incumbent resistant wouldn't work there. Converting Didi into a partner is a big win for them.
Next up, gobbling up Lyft. Looks like they really want to be the monopoly at IPO time. At this rate, they'll probably IPO at more than $100 billion. Sigh, should've interviewed with them last year, haha
>> As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart...<p>This is well said.
I really hope China adopts some kind of anti-trust regulation sometime soon. This trend of all competitors merging until only one monopolist is left standing, can't be good for their consumers, nor the economy.
im not completely sure about this - but it seems that the people who run Didi and Uber in China are cousins (<a href="http://www.wsj.com/articles/inside-ubers-fight-with-its-chinese-nemesis-didi-kuaidi-1441234010" rel="nofollow">http://www.wsj.com/articles/inside-ubers-fight-with-its-chin...</a>) - and are both linked to the powerful Lenovo family.<p>China is a huge, closed economy .. where doing business in the country means buying into powerful business families. Money stays within the family!