Uber has reached a deal to acquire ride-hailing competitor Careem for $3.1 billion, the companies announced Tuesday.

Dubai-based Careem, founded in 2012, claims more than 30 million registered users and sells car-hailing services in 120 cities across North Africa, the Middle East and South Asia, from Morocco to Pakistan.

The companies characterized the deal as the biggest-ever technology industry transaction in the greater Middle East. You can read CEO Dara Khosrowshahi's email to staff explaining the decision to buy Careem here.

The announcement comes as Uber approaches a much-anticipated initial public offering that reports have said could value the company at as much as $120 billion. It is expected to be one of the biggest tech IPOs in history.</s>Dubai (CNN Business) Uber is buying the biggest ride-hailing app in the Middle East.

In the biggest tech deal the region has ever seen, Uber is paying $3.1 billion for Careem with a mixture of cash and securities that will convert into Uber shares when the company goes public.

Careem, based in Dubai, was founded in 2012 and has since become the regional market leader with 30 million users across 90 cities in the Middle East, North Africa and Pakistan. It was valued at more than $2 billion in a funding round in October.

Careem will operate under its own brand as a subsidiary of Uber and continue to be led by CEO Mudassir Sheikha, the companies said in a statement Tuesday.

In an email to Uber staff members seen by CNN Business, CEO Dara Khosrowshahi said keeping the Careem brand and operations "has the advantage of letting us build new products and try new ideas across not one, but two, strong brands."</s>Ride-sharing behemoth Uber announced Tuesday that it's buying its Middle East rival, Careem Networks FZ, for $3.1 billion. The deal, which includes $1.4 billion in cash and $1.7 billion in convertible notes, still has to pass regulatory approval. The companies expect it to close in the first quarter of 2020.

The purchase is a massive move for Uber, which is poised to go public soon, not just because of the price of the acquisition, but also because it expands the company's international footprint. According to Uber, Careem has more than 30 million users and operates in 120 cities across 15 countries, including Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates.

Uber's CEO, Dara Khosrowshahi, said in a statement, "This is an important moment for Uber as we continue to expand the strength of our platform around the world. With a proven ability to develop innovative local solutions, Careem has played a key role in shaping the future of urban mobility across the Middle East, becoming one of the most successful start-ups in the region."

Uber will operate Careem as an independent company, with its cofounder and CEO Mudassir Sheikha staying on to run the business. Uber will continue to operate in the Middle East as well.

Careem had been a substantial competitor for Uber -- which itself operates in more than 60 countries -- and the purchase marks an evolution in Uber's approach to international growth.

Why this is a big deal for Uber's business

Careem started back in 2012 and is based in Dubai, United Arab Emirates, where Uber has operated since 2014. Uber said in an email to its staff that the Middle East region is an important area of business for the company, and that Pakistan, in particular, is "one of our fastest-growing markets in the world." Some estimates put the Middle East and Africa ride-sharing market size at $7.3 billion by 2023.

So if this region is so essential to Uber, why purchase a rival and allow it to operate as an independent company? Because Uber has learned over the past few years that trying to beat local ride-sharing companies at their own game is much easier said than done.

Back in 2016, after fighting China-based local ride-sharing company Didi Chuxing for years and spending $2 billion over the previous two years, Uber sold its business to Didi. Uber put up a good fight, but it couldn't outpace its local competitor. So it sold its business and took a 17.7% stake in Didi instead.

Then, in 2018, Uber made a similar move when it sold its Southeast Asia-based business to Grab, another rival. The deal gave Uber a 27.5% stake in Grab and gave Uber's CEO a seat on Grab's board of directors.

For Uber, the decision to spend several billion dollars acquiring Careem means that it won't have to spend mountains of cash later trying to beat the company at its own game, only to have to potentially settle for exiting the region and ending with just a stake in the company.

Khosrowshahi said in a statement that "This transaction brings together Uber's global leadership and technical expertise with Careem's regional technology infrastructure and proven ability to develop innovative local solutions."

Uber is making more calculated decisions for growing its international business than it has in the past, and it knows that "innovative local solutions" in the ride-sharing industry often win out over newcomers with piles of cash.

As IPO nears, Uber is proving that it's a transportation juggernaut

Uber's purchase of Careem is undoubtedly a step in the right direction for the company, and potential investors should take notice of its strategy. The company already holds about 60% of the ride-sharing market in the U.S., and it knows that its international business will be much harder to build out than its domestic one. Unlike in the past, Uber knows that it can win in the international market by merely putting money down on the table, instead of fighting it out with its rivals in the streets.

This shows that Uber has learned a thing or two about how to wisely grow its business, compared to its previous strategies in Southeast Asia and China. If this is an early indicator of how Uber plans to run its business once it goes public, investors are surely looking at a transportation juggernaut.

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*Stock Advisor returns as of January 31, 2019The author(s) may have a position in any stocks mentioned.</s>SAN FRANCISCO: Global ride-hailing firm Uber Technologies will spend US$3.1 billion to acquire Middle East rival Careem, buying dominance in a competitive region ahead of a hotly anticipated initial public offering.

Uber said late Monday night it would pay US$1.4 billion in cash and US$1.7 billion in convertible notes in a deal that gives it full ownership of Careem. The long-expected agreement ends more than nine months of start-and-stop negotiations between the two companies and hands Uber a much-needed victory after a series of overseas divestments.

The notes will be convertible into Uber shares at a price equal to US$55 a piece, Uber said, marking about a nearly 13 per cent increase over Uber's share price in its last financing round, led by SoftBank Group Corp more than a year ago.

The acquisition makes Careem a wholly owned subsidiary of Uber and will keep the Careem brand and app intact, at least initially. Careem co-founders Mudassir Sheikha, Magnus Olsson and Abdulla Elyas are staying on with Careem following the acquisition, the companies said.

However, Careem's board will be overhauled, with three seats going to Uber representatives and two belonging to Careem. Sheikha, who is Careem's CEO, and Olsson will have board seats. An Uber spokesman declined to say whom Uber would appoint to the board.

The US$3.1 billion cash-and-stock purchase buys out all outside Careem investors, the companies said, and Careem stock will be converted into Uber equity. Careem had raised less than US$800 million from investors and as of October had a US$2 billion valuation. Its backers include German car maker Daimler AG, Chinese ride-hailing company Didi Chuxing, Japanese internet company Rakuten Inc and Saudi investor Kingdom Holding Company.

The deal is expected to close in the first quarter of 2020, the companies said, meaning it will not be reflected in Uber's first couple of quarterly earnings releases as a public company, although it will likely be disclosed in a public IPO filing. Uber will kick of its IPO next month and is expected to receive a valuation of at least US$100 billion.

The agreement is subject to regulatory approval, including by antitrust officials in the countries where Careem operates, which could prevent the deal from moving forward or compel the companies to modify the terms.

The deal is particularly important for Uber, whose ability to be a competitive global ride-hailing player had come into question after it sold its operations in China, Russia and Southeast Asia to local rivals after sustaining heavy losses.

Uber Chief Executive Dara Khosrowshahi in a statement called the deal with Careem "an important moment for Uber".

Uber has been eager to reach an agreement before the company begins its "roadshow", when it will meet with public market investors prior to listing shares on the New York Stock Exchange. The deal enables Uber to claim dominance in a growing region for ride-hailing outside of the United States.

Uber operates in more than 70 countries, but faces strong rivals in Latin America and India, and tough regulations in Europe.

Talks between the companies had dragged on since at least last summer, sources told Reuters, although they did not get serious until the end of the year. The companies had for years battled in a competition for drivers and riders that had required discounts and subsidies and pushed prices artificially low.

Careem over the course of last year grew its business rapidly, including adding a delivery service, and went on to nearly double its valuation, pressuring Uber to increase its bidding price.

Toward the end of last year, Careem was entertaining interest from investors for another financing round when Uber moved aggressively to buy the company outright, sources said.

Careem, founded in 2012, has a larger presence than Uber in the Middle East, North Africa, Pakistan, and Turkey, operating in 98 cities there compared with Uber's roughly 23 locations.

"An Uber-Careem merger underscores the huge potential of car-hailing in the Middle East," said Sam Blatteis, CEO at the MENA Catalysts, a Middle East public policy advisory and research firm.

The merger also follows the US$580 million acquisition of Dubai-based ecommerce company Souq Group by Amazon.com in 2017, according to a US Securities and Exchange Commission filing, spotlighting the Middle East's budding technology scene.

"It's the first 'unicorn' exit in the Middle East, and it's representative of things to come out of the Middle East," said David Chao, co-founder and general partner at venture firm DCM and a Careem investor, referring to start-ups valued at US$1 billion or more.

Uber said its revenue last year was US$11.3 billion, while its gross bookings from rides were US$50 billion. But the company lost a staggering US$3.3 billion, excluding gains from the sale of its overseas business units in Russia and Southeast Asia.

Careem does not disclose its earnings.</s>Ride-hailing service Uber announced it has acquired its Middle Eastern competitor Careem for $US3.1 billion ($A4.3 billion), making it the largest-ever technology purchase in the region.

The purchase consists of $US1.7 billion in convertible notes and $US1.4 billion in cash. Under the deal, Careem will keep its brand as a wholly-owned subsidiary of Uber, operating as an independent company led by its original founders.

The Dubai-based Careem is among the Middle East's most successful start-ups, quickly becoming popular particularly in countries like Egypt and Pakistan.

Careem's success is partly because it introduced the option for passengers to pay with cash. It also launched in the region in 2012, three years before Uber.

Uber chief executive Dara Khosrowshahi said the deal expands the US-based company's strength around the world.

"With a proven ability to develop innovative local solutions, Careem has played a key role in shaping the future of urban mobility across the Middle East, becoming one of the most successful start-ups in the region," Khosrowshahi said.

Careem's chief executive and co-founder Mudassir Sheikha described the deal as a "milestone" for the company and for budding entrepreneurs in the region, as well as local and global investors.

Sheikha will lead Careem's business under Uber and report to a board of three Uber representatives and two from Careem.

Saudi-based Kingdom Holding, one of Careem's early investors, said the acquisition is an opportunity for both companies to expand and benefit from the region's rapid growth.</s>Dubai: Uber Technologies Inc. is set to announce a $3.1 billion (Dh11 billion) cash-and-share deal to acquire its Dubai-based rival Careem Networks FZ as early as this week, according to people with knowledge of the matter.

The US ride-hailing giant will pay $1.4 billion in cash and $1.7 billion in convertible notes for Careem, the people said, asking not to identified because the talks are private. The notes will be convertible into Uber shares at a price equal to $55 per share, according to the term-sheet seen by Bloomberg.

Shareholders in Careem, whose backers include Saudi Prince Al Waleed Bin Talal’s investment firm and Japanese e-commerce company Rakuten Inc., have been asked to agree to the terms of the transaction by Monday evening and a deal could be announced as soon as Tuesday, the people said.

While not confirming the deal, Dubai Media Office tweeted that “The Uber-Careem expected deal will be the largest tech-based investment in the region.”

Uber’s acquisition of Careem would come ahead of its imminent initial public offering, which could be one of the New York Stock Exchange’s biggest-ever listings. Uber is expected to publicly file for an IPO in April, kicking off a listing that could value the company at as much as $120 billion, people familiar with the plans have said previously.

Careem was valued at about $1 billion in a 2016 funding round, making it one of the most valuable technology start-ups in the Middle East. The company has over a million drivers and operates in more than 90 cities in 15 countries, according to its website.

For Uber, a deal would signal its commitment to the Middle East, where one of its biggest investors — a Saudi Arabian sovereign wealth fund — is based.

The acquisition would also be a departure in strategy for Uber, which has used such deals to offload costly overseas operations in exchange for stakes in competitors in the past.</s>Uber has announced that it’s buying Careem, a rival ride-sharing service that operates across 98 cities in the Middle East, Africa, and southern Asia, for $3.1 billion. The New York Times notes that Careem will continue to operate as a separate brand, with a board of directors consisting of a mix of Uber and Careem representatives.

Careem is an important acquisition for Uber, which recently retreated from various overseas markets in China, Russia, and Southeast Asia. With an established business that spans 14 countries, Careem will give Uber a foothold in countries where it lacks a significant presence, as well as introducing it to markets like Iraq and Morocco, where it does not currently operate.

Careem will be a separate brand, but parts of its network will be integrated over time

Uber is expected to IPO next month, with a valuation of as much as $120 billion. However, Reuters notes that the company lost around $3.3 billion last year on revenues of $11.3 billion, as it spent money subsidising its riders and drivers to become more competitive with rivals. Its closest US-based rival, Lyft, filed its IPO at the beginning of March, with an expected valuation of up to $23 billion.

In a memo sent to Uber’s staff that was later published by CNBC, the company’s CEO Dara Khosrowshahi said that the structure of the deal would allow Uber and Careem to “build new products and try new ideas across not one, but two, strong brands,” but said that over time he expected parts of their networks to integrate in order to increase efficiency, reduce wait times, and launch new products like high-capacity vehicles.

The acquisition, which consists of $1.4 billion in cash and $1.7 billion in convertible notes, is currently subject to regulatory approval. Khosrowshahi says he expects the process to be completed until early 2020.</s>Global ride-hailing service Uber will acquire its Middle East rival Careem for $3.1 billion, the two companies announced on Tuesday.

"Careem and Uber are joining forces. We have reached an agreement in which Uber will acquire Careem for $3.1 billion," a joint statement said.

Dubai-based Careem is among the Middle East's most successful startups. Careem is popular across the Middle East in part because it introduced the option for riders to pay by cash rather than just credit card.

Uber's CEO Dara Khosrowshahi said in a statement the purchase expands the U.S.-based company's strength around the world.

The acquisition makes Careem a wholly owned subsidiary of Uber and will keep the Careem brand and app intact, at least initially.

However, Careem's board will be overhauled, with three seats going to Uber representatives and two belonging to Careem.

The $3.1 billion cash-and-stock purchase buys out all outside Careem investors, the companies said, and Careem stock will be converted into Uber equity. Careem had raised less than $800 million from investors and as of October had a $2 billion valuation. Its backers include German car maker Daimler AG , Chinese ride-hailing company Didi Chuxing, Japanese internet company Rakuten Inc and Saudi investor Kingdom Holding Company.

The deal is expected to close in the first quarter of 2020.</s>Ride-hailing service Uber announced on Tuesday it has acquired Mideast competitor Careem for $3.1 billion, giving the San Francisco-based firm the commanding edge in a region with a large, young, tech-savvy population.

Uber said the purchase consists of $1.7 billion in convertible notes and $1.4 billion in cash. It marks the largest technology transaction in the Middle East — outside of Israel — and propels the Dubai-based firm to legendary status among the region’s budding tech startup scene.

Under the deal, Careem will keep its brand and app unchanged, at least for now. It will operate as a wholly owned subsidiary of Uber and be led by its original founders. The deal is expected to close in the first quarter of 2020 and is subject to regulatory approval in several countries.

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It comes as Uber’s losses widened last year ahead of plans for an initial public stock offering this spring.

Uber CEO Dara Khosrowshahi said the acquisition of Careem marks “an important moment for Uber as we continue to expand the strength of our platform around the world.”

In a memo to staff, Khosrowshahi said that keeping the Careem app intact allows Uber to try out new ideas across both brands. Over time, the firms will integrate part of their networks, he said.

Uber’s stiffest competitor in the Middle East had been Careem, which launched in 2012 — three years before Uber entered the local market.

Careem, founded by two former management consultants at McKinsey & Co., is popular in countries like Egypt and Pakistan where people overwhelmingly use cash over credit cards.

Careem’s app gave riders localized options, like paying by cash rather than Uber’s initial credit card-only system. Last year, Careem was said to be exploring a bus service for Egypt’s lower-income riders.

Despite Uber’s regional launch in 2015 and services like Uber Eats that delivers food, Careem maintained the lead operating in more than 100 cities across 15 countries. The company was valued at about $1 billion in a 2016 funding round and an estimated $2 billion last year.

Dubai now has three of the region’s most high-profile start-up success stories. In 2017, Amazon purchased Mideast online retailer Souq.com for reportedly close to $700 million. A decade ago, Yahoo acquired Dubai-based Arab-language internet site Maktoob.

Careem’s CEO Mudassir Sheikha described the acquisition as a “milestone” for the company and for budding entrepreneurs in the region. Under the deal, he will lead Careem’s business under Uber and report to a board comprised of three Uber representatives and two from Careem.

“This has put our region on the map and has shown it’s a great place to build some of the best technology in the world,” Sheikha said in a statement to Careem customers.

Saudi Technology Ventures, one of Careem’s investors, said the local ride-hailing firm succeeded by using its deep local knowledge and expertise to cater to the needs of Mideast’s youth.

Other Careem investors include Kingdom Holding, chaired by Saudi Prince Alwaleed bin Talal, German car manufacturer Daimler AG, Japanese tech firm Rakuten and Mideast venture capital firm Wamda.

Meanwhile, Uber’s investors include Saudi Arabia’s sovereign wealth fund, which has a $3.5 billion stake in the ride-sharing app.</s>Technologies Inc. Chief Executive Officer has cut the largest deal of his tenure, buying Middle Eastern ride-hailing competitor Networks FZ for $3.1 billion.

will pay Dubai-based $1.4 billion in cash and another $1.7 billion in convertible notes when the deal closes, the two said in a statement. They are seeking regulatory approval in the 15 countries where operates. Bloomberg had previously reported some details of the deal, which is expected to close in the first quarter of 2020.

The deal comes as San Francisco-based is preparing to file in April for an initial public offering, people familiar with the matter have said. The acquisition isn’t expected to slow down Uber’s IPO process and will allow ride-hailing firm to emphasize its global footprint relative to rival Lyft Inc., which is expected to begin trading Friday.

The acquisition will be Uber’s priciest and will mark the first time the company bought one of its regional competitors. Uber has sold many business units, including in China, Southeast Asia and Russia, taking stakes in Didi Chuxing Inc., Grab and Yandex NV in the process. Another recent major purchase was electric bike company Jump Bikes.

The Careem acquisition represents one of the largest technology deals in the Middle East, according to data compiled by Bloomberg. As part of the agreement, Careem will continue to operate as a standalone brand even after the deal closes.
•Careem will become a wholly-owned subsidiary of Uber
•Careem will have its own board, with three representatives from Uber and two from Careem
•Both companies’ apps will continue to operate under separate brands
•Jefferies LLC acted as exclusive financial adviser to Careem on the transaction

Because the move combines the two largest ride-hailing in the Middle East, it could face regulatory scrutiny. One inevitable selling point of the deal will be that it allows the two to raise prices, while also reducing pressure to compete with each other in how much they pay drivers.

"Uber was very good at convincing the management team that they can run independently post-acquisition," said venture capitalist David Chao, an investor in Careem, referring to the Dubai-based firm. "I think terms were good and this was a huge victory for Uber."

Some of Careem’s early backers are set to benefit from the deal. Riyadh-based Al Tayyar Travel Group, one of the company’s largest corporate shareholders and earliest investors, said it expects to gain at least 1.78 billion riyals ($470 million), pushing shares up more than 8 percent. Saudi Telecom expects to get about $274 million in cash and stock.

“For investors of Careem, this acquisition is a good deal as they have the minimum guaranteed price of $3.1 billion,” said Meziane Lasfer, Professor of Finance at Cass Business School in Dubai. As part of the acquisition is paid for in Uber shares, Careem investors also have “a large potential upside value” if the shares go higher than the $55 price the deal is based on.
U.S.-owned company Uber buys Dubai-based ride-sharing company Careem for $3.1 billion in order to further solidify its Middle Eastern presence.