Published: Tue, March 26, 2019
Markets | By Otis Pena

Uber is acquiring Middle Eastern rival Careem for $3.1 billion

Uber is acquiring Middle Eastern rival Careem for $3.1 billion

Uber has bought rival Middle East ride-hailing service Careem for $3.1bn (£2.3bn) in its biggest-ever acquisition to date. The transaction is expected to close in Q1 2020.

Shortly before confirming the news publicly, Uber CEO Dara Khosrowshahi sent out a companywide email, with the subject line "Accelerating in the Middle East", confirming the news internally to Uber staff.

Uber and Careem have now reached an agreement for Uber to acquire Careem for $3.1 billion where $1.7 billion will be in convertible notes and $1.4 billion in cash.

The company has chose to operate Careem independently for now for better operations and lower wait time, and also to expand the service with new products like high-capacity vehicles and payment system.

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

Upon closing, Careem will become a wholly-owned subsidiary of Uber, preserving its brand.

Careem's app gave riders localized options, like paying by cash rather than Uber's initial credit card-only system.

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

"Joining forces with Uber will help us accelerate Careem's goal of simplifying and improving the lives of people, and building an awesome organisation that inspires". Mudassir Sheikha, the co-founder and CEO of Careem will lead the Careem business and will present reports to the three representatives which includes one from Uber and the remaining two from Careem.

Dubai-based Careem operates in over 120 cities stretching from Morocco to Pakistan.

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.

"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.

Having worked as consultants for McKinsey and Company, Olsson and Sheikha understood the dynamics of the markets in the Middle East and were able to pivot and react quickly to customer needs.

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.

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