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The two dominant ride-hailing app rivals in China have joined forces to create an even more formidable company.
Didi Chuxing, a domestic ride-hailing service leader in China, is acquiring Uber’s operations in China. According to sources who told Bloomberg, the company’s valuation after the deal will be an estimated $35 billion. Didi stated that it will be buying Uber’s brand, business and data in the country for $1 billion.
Uber’s CEO Travis Kalanick and Didi founder Cheng Wei will work together and join each other’s boards. Cheng commented upon the alliance:
“Didi Chuxing and Uber have learned a great deal from each other over the past two years. This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.”
Kalanick wrote in a blog post:
“As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. I have no doubt that Uber China and Didi Chuxing will be stronger together.
“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.”
Bloomberg states that shareholders of Uber China will receive a 20% stake in the combined company.
In the past, Uber and Didi have spent billions attracting riders and drivers to gain greater market share. Though Uber made great strides as a U.S. company in China, it struggled against local competitors.
In 2015, Didi merged with another ride-hailing service, Kuaidi, to fight off non-domestic Uber. Didi is backed by powerful giants including Alibaba Group Holding Ltd. and Tencent Holdings Ltd.
In addition, Apple Inc. invested $1 billion into Didi this year, which led to its valuation at nearly $28 million. Following the announcement, Kalanick tweeted a humorous response regarding his girlfriend, Gabi Holzwarth, and her shares in Apple.
Despite the exciting news, the acquisition is still awaiting the approval of the Chinese government.