Uber cedes Russia to Yandex with US$3.7bil merger deal
15 July, 2017, 03:14
Yandex has joined hands with Uber to merge their ride-sharing businesses in Russian Federation and five eastern European markets, the two companies announced yesterday.
Gore-Coty said Uber's 36.6 per cent stake is worth $1.4 billion, based on an agreed valuation of $3.725 billion for the combined company.
"The new company's goal will be to serve the needs of riders, drivers and cities as we develop a fast-growing, sustainable ride-sharing, food delivery and logistics business in the region", he said. Uber will invest $225 million into the new company, but will only have a 36.6 percent stake and have three of the seven seats in the board.
"Uber and Yandex have entered into an agreement to form a new company", the head of Uber's operations in Europe, the Middle East and Africa, Pierre-Dimitri Gore-Coty, said in a statement, calling it "an exciting opportunity in a unique situation".
Uber, which started its business in Russian Federation in 2014, will invest US$225mln.
However, because Uber businesses in Azerbaijan, Belarus and Kazakhstan participate in the deal with Yandex, which is under sanctions in Ukraine, it is obvious that to run a business in these countries from Ukraine will become impossible.
The company's chief executive Travis Kalanick resigned in June under pressure from investors over a corporate culture rife with bullying and sexism. In 2016, the company suspended its operations in Budapest after protests called on the government to impose the same rules on its drivers as apply to regular taxis.
The joint venture is the latest sign of the challenges that Uber has faced expanding overseas, experts say, where it has engaged in costly price wars against entrenched local competitors. But that figure is down from the last three months of 2016, when Uber said it lost almost $1 billion.
Former Uber CEO Travis Kalanick, who initially filed for a leave of absence but then later chose to resign to accommodate the requests of shareholders, helped negotiate the deal with Yandex alongside former Uber senior VP of business Emil Michael.
A statement by Yandex on Thursday said Uber and Yandex Taxi would combine into a new company in Russia, Azerbaijan, Armenia, Belarus and Kazakhstan. In the first quarter of this year, Uber reported more than $700 million in losses. It said it was investing $100 million into the venture, with a 59.3 percent stake.
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