Published: Wed, August 03, 2016
Economy | By Melissa Porter

Uber and Didi carve up antitrust arbitrage

Didi will buy Uber's brand, business and data in the country, the Chinese company said in a statement. The value of the combined companies will be approximately $35 billion. According to the company, which claims to have 87 percent of the Chinese market, it completed 1.4 billion rides in 2015. Both Uber and Didi have been spending significantly to compete in China.

Uber will become the largest stakeholder in the Chinese company with its stake. Earlier in the year, Didi invested $100 million in Lyft. Uber has already amassed billions and recently received an investment of $3.5 billion from Saudi Arabia's public investment fund.

"Sustainably serving China's cities, and the riders and drivers who live in them, is only possible with profitability", Kalanick wrote in a Facebook post.

The deal, announced on Monday, comes just a few days after the Chinese Communist Party announced a new set of guidelines for the ride-sharing industry.

Both companies have invested billions of dollars into their operations in China in a bid to attract consumer base by using subsidies.

Last month there were rumors that both companies may opt for a merger to end their battle.

Uber usually earns high profits from most of its market but has lost $2 Billion in the case of China.

The combined firm, which has been renamed Didi Chuxing, raised $7 billion in its most recent fundraising round, including $1 billion from Apple. Uber will continue to operate its own app in China for now.

Didi had agreed to work with the U.S.'s Lyft Inc., India's Ola and Southeast Asia's Grab. The strategic alliance was formed to take on Uber in all countries.

However, the Uber chief said that he now believed that it made more sense to cooperate with Didi Chuxing.

Uber is bowing out in China.

The partnership follows an expensive battle between the two companies.

The New York Times characterizes Uber's fight in China as somewhat effective, with frequent trips made by Kalanick and his clever use of Communist party language assuaging political leaders - see "People's Uber", the company's product previous year.

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