Uber set for rapid Mideast expansion with Careem acquisition
LONDON - With the announcement it had acquired its Middle East rival Careem for $3.1 billion, US ride-hailing service Uber has executed the biggest tech deal in the region.
Uber will purchase Careem with $1.7 billion in convertible notes and $1.4 billion in cash. The transaction is expected to be finalised, after regulatory approvals, in the first quarter of 2020.
The deal would see Uber acquire all of Careem’s mobility, delivery and payments businesses from Morocco to Pakistan, with major markets including Egypt, Jordan, Pakistan, Saudi Arabia and the United Arab Emirates.
Begun in 2012, three years before Uber, Dubai’s Careem is one of the Middle East's most successful start-ups. It is popular across the region, particularly in Egypt and Pakistan, in part because it introduced the option for riders to pay by cash or credit card.
"With a proven ability to develop innovative local solutions, Careem has played a key role in shaping the future of urban mobility across the Middle East, becoming one of the most successful start-ups in the region," Uber CEO Dara Khosrowshahi said in a statement.
The Financial Times reported that the deal is a reversal from Uber’s exits from costly markets, such as China, South-east Asia and Russia in exchange for minority stakes in competitors Didi Chuxing, Grab and Yandex.
“This is a milestone moment for us and the region and will serve as a catalyst for the region’s technology ecosystem by increasing the availability of resources for budding entrepreneurs from local and global investors,” Careem CEO Mudassir Sheikha said in a release announcing the deal.
Saudi-based Kingdom Holding, one of Careem's early investors, said the acquisition is an opportunity for both companies to expand and benefit from the region's rapid growth.
When the deal is finalised, the two ride-hailing services will operate as separate brands, despite Careem becoming a wholly owned subsidiary of Uber. Sheikha is to head the Careem business, which will report to its own board that will include three representatives from Uber and two representatives from Careem.
The only hitch in the deal relates to one of Careem’s and Uber’s biggest markets -- Egypt. The Egyptian Competition Authority (ECA) said it would wait for formal notification of the deal from the two companies before investigating the proposal.
Uber’s acquisition of Careem “could eliminate competition on the markets in which the parties operate,” it said, adding that both had “committed not to implement the agreement… until the ECA makes it finalised," Agence France-Presse reported.
Uber announced that once the acquisition of Careem was completed, it would add Prince Alwaleed bin Talal Al Saud’s Kingdom Holding Company, Al Tayyar Travel Group Holding Company and Saudi Telecom to its shareholder base, Bloomberg News said.
As part of the $3.1 billion deal, Careem shareholders would receive notes that can be converted into Uber stock.
In 2016, Saudi Arabia’s Public Investment Fund (IPF) became one of the biggest investors in Uber, injecting a $3.5 billion direct investment into the firm, giving the IPF 14% ownership.
Uber said its revenue last year was $11.3 billion, while its gross bookings from rides were $50 billion. However, the company lost $3.3 billion, excluding gains from the sale of its overseas business units in Russia and South-east Asia, Thomson Reuters reported.
The deal follows the $580 million acquisition of Dubai-based ecommerce company Souq Group by Amazon.com in 2017.