Didi Chuxing based in China and Uber have each confirmed that Didi agreed to purchase Uber’s business Uber China based in China as a pathway to get the two on-demand transportations companies that are unprofitable turned around to make money.
This deal was heavily speculated earlier on Monday in China. The two businesses will keep their own brands, app as well as business operations, with just the backrooms being merged.
Didi announced that it would integrate the technological and managerial experience and expertise of each team.
The explanation Didi gave of the financials noted that Uber would receive 5.89% of a stake in the new entity, with a preferential equity that equals 17.7% economic interest in the parent Didi Chuxing.
Existing investors in Uber China, which includes Baidu the dominant search company in China, will be given 2.3% of the new entity.
Meanwhile, Travis Kalanick the CEO at Uber might have come the closest ever to admitting that Uber might not win along in every market it chooses to have its operations.
Didi Chuxing and Uber are investing many billions of dollars in the China market and both businesses have not yet turned a profit, said the Uber CEO.
Becoming profitable is the sole way of building a business that is sustainable that can serve the riders of China the best, as well as the drivers and different cities in which it operates, added the CEO.
Didi’s official announcement does not spell out the amount of actual money that is changing hands in the deal. Didi claims that it has 15 million drivers and over 300 million users in China alone. It simply said that it would obtain a minority equity interest in its rival Uber.
Nevertheless, when the news first broke of this possible deal, reports on Internet said that a $1 billion investment would be made by Didi in the Uber global business.
Uber is said to be lacking in all major metrics considered key in winning the industry. Didi raised more cash, was valued higher and alleged its footprint in China was much bigger than that of Uber’s.
Both like arguing the point over the footprint and seemed to have come to a détente at the PR level following the news of the merger. Kalanick in another post on Facebook did not provide a number for comparison of his service to that of Didi’s.
Uber China was recently given a $7 billion value, while Didi is valued at over $28 billion.
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