Uber cedes Russian Federation to Yandex with US$3.7bil merger deal

Uber will own about 36.6% in the combined company with Yandex

Uber will own about 36.6% in the combined company with Yandex

Yandex will hold a majority 59% stake in the new company, Uber will own 36.6% and employees will hold the rest. Uber will own just under 40 percent of the new business. Investors have raised questions as recently as this month about Uber's continued losses in India and South-East Asia, asking privately whether the company would be better served by cutting deals with market leaders Ola and Grab, two people familiar with the matter said.

A statement by Yandex on Thursday said Uber and Yandex Taxi would combine into a new company in Russia, Azerbaijan, Armenia, Belarus and Kazakhstan.

"With this deal Yandex eliminates an aggressive competitor which, in the long run, will lead to improved monetization and profitability", Raiffeisen Bank analyst Sergey Libin said.

Uber's EMEA Head, Pierre-Dimitri Gore-Coty, said the Russian merger deal wouldn't affect their operations in other countries. In recent months, Uber has been rocked by regulatory scandals, legal battles, accusations of harboring a toxic workplace culture, and a flurry of departures from top leadership, including the resignation of Travis Kalanick, the brash, former chief executive.

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The sale was disclosed in a filing with the Securities & Exchange Commission, which is available at this link . The institutional investor bought 25,181 shares of the retailer's stock, valued at approximately $1,390,000.

The combined venture will also include Uber's EATS online meal delivery business.

The deal with Yandex is Uber's second retreat from a major market. In August 2016, Uber sold its China unit to Didi Chuxing in exchange for a 20% stake and promised investment. Uber reported in late May that its net loss, excluding employee stock options and other items, narrowed in the first quarter to $708 million from $991 million in the fourth quarter. The ownership stakes reflect how Yandex.Taxi is roughly twice the size of Uber in the region as measured both in terms of rides and gross bookings, the companies said.

Uber has agreed to a merger of its ride-hailing service in Russian Federation with rival Yandex. Together, their businesses handle 35 million rides a month, and will also operate in Kazakhstan, Azerbaijan, Armenia, Belarus and Georgia.

The implied valuation for Yandex.Taxi of about US$2bil (RM8.59bil) in the deal with Uber is "substantially" higher than the levels expected by the market, BCS Global Markets said in note to clients on July 13. "Drivers will be able to perform more trips per hour while passengers will continue to enjoy affordable prices", the company said.

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