ComfortDelGro Corp., Singapore’s largest taxi operator, on Friday announced it is buying a 51 per cent stake in Uber Technologies Inc.‘s car rental unit in Singapore for S$295 million ($218 million) and forming a joint venture with the ride-hailing giant.
Uber will retain the remaining 49 per cent stake in Lion City Holdings Pte Ltd, its wholly-owned car rental subsidiary in Singapore. The subsidiary operates Lion City Rentals which has a fleet of about 14,000 vehicles.
Valued at about S$642 million ($474.3 million), with a cash consideration of S$295 million ($217.9 million), it ranks as ComfortDelGro’s single largest deal to date.
ComfortDelGro lost an estimated $370 million – or about 11 per cent of its market value – in four months as investors lost patience regarding the planned transaction with Uber. It first announced the potential alliance more than three months ago.
Following the alliance, ComfortDelGro’s taxi drivers will be able to receive ride requests on the Uber driver app, while users of the Uber app will get an opportunity to directly book a ComfortDelGro taxi.
“The transaction is expected to result in increased demand for both private hire and taxi drivers as well as increased choice, shorter waiting times, and greater reliability for consumers,” ComfortDelGro said in a statement.
According to a media release, the two companies are finalising additional partnership opportunities and will make further announcements in the upcoming months.
In a statement, ComfortDelGro Chairman, Lim Jit Poh, said, “ComfortDelGro has been in the taxi business for close to five decades and we have seen the industry evolve significantly. Despite the many changes that have taken place, taxis have remained a relevant option for people get around the city. The question many have been asking is: For how long?”
Commenting on the agreement, Brooks Entwistle, Uber’s Chief Business Officer for Asia Pacific, said, “This strategic collaboration is good news for our two companies, it is also great for riders, drivers and for Singapore.”
Southeast Asia has become one of the toughest battlegrounds for Uber as it faces stiff competition from Singapore-headquarter Grab, its biggest rival in Southeast Asia, and Indonesia’s Go-Jek.
The two Southeast Asian unicorns have amassed massive funding to take on their Western rival. In July, Grab raised $2 billion in funding from Didi Chuxing, which outmanoeuvred Uber in China, and SoftBank. Go-Jek, on the other hand, received funding from China’s Tencent and JD.com as part of its latest round believed to be worth around $1 billion.
Japan’s SoftBank, which backs other Uber rivals such as Ola in India, is leading a group of investors that has made a multi-billion dollar tender offer to buy Uber shares from its existing shareholders. The offer, believed to be 30 per cent below what investors paid in Uber’s last funding round in 2015, is considered low by many.
Uber’s rivals in Southeast Asia are unfazed. Asked about SoftBank’s planned Uber investment, Go-Jek CEO Nadiem Makarim told Bloomberg he was not worried at all.
“Uber has been sidelined in Indonesia and much of Southeast Asia. We learned early on with Grab it’s not about who has the most money; it’s about who innovates faster,” he added.