Uber has confirmed rumors that it’s building out its presence in the Middle East, Africa, and Asia by acquiring Dubai-based ride-hailing service Careem.
Reports first surfaced that Uber was in advanced talks to buy Careem last month, and over the weekend fresh rumors emerged that a deal was to be announced imminently. Today, Uber revealed that it is buying Careem in a deal worth $3.1 billion, constituting a combination of $1.4 billion in cash cash and $1.7 billion in convertible notes.
While Uber has historically held the largest global footprint of all the ride-hailing firms, the San Francisco-based company has struggled to gain traction in key markets where local players have ruled the roost — this has led Uber to retreat from a number of regions. Back in 2016, Uber sold its Chinese arm to local etaxi giant Didi Chuxing in a $35 billion deal, before going on to join forces with Yandex.taxi in Eastern Europe and then offloading its Southeast Asian operations to Grab exactly a year ago.
So today’s announcement is notable insofar as it bucks a recent trend that has seen Uber cede control of its regional businesses to local rivals, while also giving it a foothold in markets it has hitherto not covered.
With Uber preparing for its initial public offering (IPO), it is seeking new avenues for growth, and Careem offers exactly that.
Founded out of Dubai in 2012, Careem today claims more than 30 million users and 1 million drivers spread across 14 markets: the United Arab Emirates (UAE), Qatar, Saudi Arabia, Bahrain, Lebanon, Pakistan, Kuwait, Egypt, Morocco, Jordan, Turkey, Palestine, Iraq, and Sudan. The company has raised around $770 million since its inception, with big-name backers including China’s Didi Chuxing, which has previously invested in other ride-hailing services including Lyft and India’s Ola.
Careem has been following a similar growth model to that of Uber. While its core business is ride-hailing, it is using the underlying transport network infrastructure to expand into related services, including food and pharmaceutical deliveries. That side of Careem’s business is still in its embryonic stage, but Uber sees room for further growth through pooling their platform and resources in more than a dozen regions that collectively cover around 600 million people.
Consolidation has played a big part of the global ride-hailing industry, and other notable deals to emerge including Daimler’s MyTaxi which merged with the U.K.’s Hailo before going on to snap up Taxibeat which has a presence in Greece and Latin America. Last month, rivals BMW and Daimler launched a new $1 billion urban mobility joint-venture, following the merger of their various ride-hailing and car-sharing businesses.
It’s clear that Uber has faced increased competition around the world, with Didi Chuxing last year expanding into Mexico, one of Uber’s strongholds. Uber’s decision to snap up Careem puts Uber back on the front foot — it doesn’t want to give away any more of its business to competitors and, ultimately, it is indicative of its wariness of losing more ground as prepares for life as a public company.