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Uber China to merge with rival Didi Chuxing

Uber is ending its two-year attempted conquest of China and will settle for a stake in rival Didi Chuxing worth an estimated $7 billion.

Published onAugust 1, 2016

Uber Technologies Inc. signage stands inside the company's office prior to Senator Marco Rubio, a Republican from Florida, speaking in Washington, D.C., U.S., on Monday, March 24, 2014. Rubio addressed the need to adapt antiquated government regulations to increase economic opportunities for the 21st century and outdated regulations limit consumer choice. Photographer: Andrew Harrer/Bloomberg via Getty Images
Photographer: Andrew Harrer/Bloomberg via Getty Images

Uber has met it’s match in China. The company has announced that Uber China will soon be sold off to local ride-sharing rival Didi Chuxing. The news of the looming merger comes just days after China’s Ministry of Transportation passed federal regulation legalizing ride-sharing networks.

Uber China will keep its name, but the company will merge into the much larger Didi Chuxing once this deal goes through. Didi Chuxing will give Uber a 5.89 percent stake in the merged entity, meaning Uber will receive about 17.7 percent in preferred equity interest. This is about a $7 billion share of Didi Chuxing’s estimated $35 billion value after the merger.

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Uber founder Travis Kalanick and Didi Chuxing founder Cheng Wei will join the boards of each other’s companies. Didi Chuxing also plans to bring on Uber China’s human capital for expertise in tech and management.

“This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level,” Wei said.

Though Uber China now serves about 150 million riders each month, the venture has cost Uber $2 billion over the last two years. Didi Chuxing, which served 1.43 billion riders last year, has had a lot to do with that, but China’s homegrown ride-sharing network has been struggling to turn a profit too.

“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there,” Kalanick said in a blogpost. “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.”

Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there.

Earlier this year, Apple, an assumed Uber rival, invested $1 billion in Didi Chuxing. With Apple rumored to be working on a driverless car network called Project Titan, there has been speculation that the company will rely on a ridesharing network to manage its autonomous vehicles. Regardless of whether or not Apple plans to rival Uber, it’s now connected to the company through Didi Chuxing.

What are your thoughts regarding this marriage between the two biggest ride-sharing names in China? Give us your take on the acquisition in the comments below.

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