Singapore’s ride-hailing major Grab on Monday announced that it has acquired Uber’s Southeast Asia operations, including ridesharing and food delivery businesses, in the region.
Under the terms of the deal, Uber will acquire a 27.5 per cent stake in Grab and Uber CEO Dara Khosrowshahi will join the board of the Singapore-based firm.
In a statement, Grab said this is the largest acquisition by a Southeast Asian internet firm. No other financial terms were disclosed.
“The combined business is the leader in platform and cost efficiency in the region. Together with Uber, we are now in an even better position to fulfil our promise to outserve our customers. Their trust in us as a transport brand allows us to look towards the next step as a company: improving people’s lives through food, payments and financial services,” said Grab co-founder and Group CEO Anthony Tan.
A Grab spokesperson said the acquisition also speeds up its transport vertical’s journey to profitability. “In transport, we’re actively executing our multi-modal vision, adding bicycles (GrabCycle) and preparing other new integrations that will put all transport choices on just one platform. With this acquisition, our platform is the leader in cost efficiency, and we now have a path to profitability in the transport vertical,” the spokesperson added.
The deal marks an exit for Uber from yet another market. It has previously ceded China to ride-hailing leader Didi Chuxing, also an investor in Grab, in 2016 in return for a 17.5 per cent stake. The American firm later sold its Russian business to Yandex.
In an email to Uber employees about the agreement, Khosrowshahi said, “One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors. This transaction now puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don’t.”
However, the payoff may not be too bad for Uber. “After investing $700 million in the region, we will hold a stake worth several billion dollars, and strategic ownership in what we believe will be the winner in an important global region,” Khosrowshahi noted in his email. Grab was valued at $6 billion in its most recent funding round last year.
Grab is confident of gaining regulatory approval for the deal and said it will notify the Competition Commission of Singapore about the agreement.
The merger excludes Uber’s car rental subsidiary, Lion City Rentals, a Grab spokesperson said. Uber had sold a 51 per cent stake in LCR to the city-state’s largest taxi operator ComfortDelGro last year. That deal underwent a comprehensive review by the Competition Commission and a verdict is still pending.
Speculation about the merger gained ground after Grab’s early backer SoftBank Group Corp acquired a nearly 15 per cent stake in Uber in January. The move is seen as an attempt to stem costs at the American firm before it heads to the public markets for an IPO that could happen as early as next year.
The merger has implications beyond ride-hailing for Grab. In its statement, the Singapore-headquartered firm said it will expand its existing GrabFood businesses, currently operational in Indonesia and Thailand, to Singapore and Malaysia after integration of the Uber Eats business. Uber Eats will run until the end of May, after which Uber delivery and restaurant partners will move to the GrabFood platform.
Grab plans to make GrabFood available across all major Southeast Asian countries in the first half of 2018. The firm also said its GrabPay mobile wallet will be available across all major Southeast Asian countries by the end of the year.