Uber is broadening its footprint in the Middle East after lastly sealing a handle ride-sharing competitor Careem. The move comes just a week after Lyft kicked off its IPO plans.
In a press release Tuesday morning, Uber announced that it has reached an agreement with Careem to purchase the business for $3.1 billion, consisting of $1.7 billion in convertible notes and $1.4 billion in cash. The acquisition of Careem is subject to relevant regulative approvals. The deal is anticipated to close in Q1 2020.
Under the agreement, Careem will keep its brand and app unchanged, at least for now. It will work as a wholly owned subsidiary of Uber and will be led by its original creators.
Significant markets for Careem are mentioned to consist of Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates, with the service operating in 120 cities throughout 15 countries overall.
The startup has raised around $772M to date, according to Crunchbase, with financiers including Saudi Arabia’s Kingdom Holdings, Chinese ride-hailing giant Didi Chuxing, and Japanese tech giant Rakuten.
It was founded as a ride-sharing Uber rival in 2012 but has since diversified into offerings such as food, bus services and credit transfers– bolstered employing acquisitions of its own, such as RoundMenu and Commut (both announced last year).
The price-tag Uber is spending for Careem is noteworthy for being substantially greater than current reports of its evaluation. Last fall, when Careem raised a $200M tranche of funding, the business was reported to be valued at around $2BN.
Catching Careem now gives Uber some ammunition for the development story it will desire to have the ability to pitch to potential investors ahead of its move to go public. It will also function as a counter-narrative to balance out the stiff losses its service continues to sustain every quarter, even as it needs to spend $1.4 BN in money to bring Careem into the fold.
Most recently, Uber reported $3BN in Q4 2018 earnings with bottom lines of $865M– the latter aided by a tax advantage that conserved it from declaring a $1.2 BN bottom line in the period.
While on a yearly basis, its incomes came in at $3BN for 2018 and losses amounted to $1.8 BN vs. $2.2 BN in 2017, so it’s at least shrinking the gap.
Uber prepares for its IPO
The announcement comes as Uber approaches a much-anticipated preliminary public offering that reports have stated might value the business at as much as $120 billion. It is anticipated to be among the most significant tech IPOs in history.
In the past, international deals have seen Uber exit big markets like China and Southeast Asia, as homegrown giants ate away at its market command and it became too pricey to compete.
The company sold its China business to local tech company Didi Chuxing in 2016 and its Southeast Asia operations to Singapore’s Grab last year in return for equity stakes in the two rivals.
The offer will further grow Uber’s permanence in the Middle East, where one of its most significant backers, Saudi Arabia’s sovereign wealth fund, is based.