Overview of the deal
- Acquirer: Grab Taxi Holdings - Advisor: The Raine Group
- Target: Uber Inc. SE Asia Ops. - Undisclosed Advisor
- Announcement date: March 2018
Following a year of difficulties for Uber, Dara Khosrowshahi stepped in as CEO in August 2017, effectively assuming responsibility to resolve Uber’s various issues and help the company go public. In light of these events, a consortium of investors led by Japanese tech conglomerate SoftBank has closed a deal to purchase shares from existing Uber employees and investors at a discount, making Uber’s valuation drop from $68 bn to $48 bn. Following this agreement, Softbank now holds more than 15% of Uber, thus becoming the firm’s largest stakeholder.
Softbank has reportedly repeated its ambition to refocus Uber’s activities on its core markets, namely the U.S., along with Europe and Latin America, as an aim to help the company achieve profitability more quickly before its IPO. In 2016, Uber exited the Chinese Market by selling its local operations to ride-hailing super-giant DiDi, after admitting defeat in an aggressive price war. In 2017, Uber agreed to merge its Russian business with rival Yandex. Thus, Uber’s decision to exit from the South-East Asian market follows the company’s strategic path to shift its efforts from growth and expansion to profitability. As part of the deal, Uber will receive a 27.5% stake in Grab in exchange for Uber’s ride-hailing and food delivery businesses in 8 South-East Asian countries. Moreover, Uber’s CEO Dara Khosrowshahi will join Grab’s board.
“[Uber] strategically retreated from Southeast Asia and Russia in exchange for equity stakes in competitors Grab and Yandex, respectively. Uber continues to compete in Brazil and India, but this kind of a strategic decision-making demonstrates that Uber is no longer focused solely on growth and world domination. It may even be finally focused on profits.” -Tim J. Smith, Fortune
Company details (Grab)
Grab is a ride-hailing and carpooling service which is currently operating in 220+ cities across 8 countries in South-East Asia.
- Founded in 2012, headquartered in Singapore
- President and CEO: Anthony Tan
- Number of employees: 1,000-5,000
- Latest Valuation: $6bn
- FY17 Revenue: $1bn
Company details (Uber Technologies Inc.)
Uber Technologies Inc.’s online platform and mobile app provide customers with car transportation and food delivery services in more than 65 countries and 600 cities worldwide.
- Founded in 2009, headquartered in San Francisco, CA
- CEO: Dara Khosrowshahi
- Number of employees: 16,000
- Latest Valuation: $48bn
- FY17 Revenue: $7.5bn* - FY17 Adjusted EBITDA: -$2.5bn*
*These numbers are approximations based on non officially disclosed information because Uber is a private company
Projections and assumptions
Besides from benefiting from the removal of its most direct competitor, Grab would be able to draw Uber’s customer base, drivers and employees, which would bring Grab closer to making a profit.