Getty Uber's CEO Dara Khosrowshahi
- Uber is buying its rival Careem for $3.1 billion, it confirmed Tuesday.
- The acquisition is a bid for dominance in a fiercely competitive region.
- Uber's CEO Dara Khosrowshahi told employees that Careem will remain an independent brand.
Uber is buying Careem, one of its biggest competitors in the Middle East, in a $3.1 billion deal for dominance in a highly competitive region.
The deal was finally confirmed on Tuesday after more than nine months of start-and-stop negotiations. Careem will remain an independent brand, Uber said, but investors will be completely bought out through $1.4 billion in cash and $1.7 billion in convertible notes.
In an an interview in February, Careem CEO Mudassir Sheikha explained why it would be very difficult for Uber to reach significant scale in the region. In hindsight, his comments explain why the deal makes perfect sense for Uber.
"For a global player to come in and start providing a service to the top 2% to 3% of the population is not difficult, they're used to the convenience," Sheikha said. "But as soon as you start going down the masses, you require a lot of tailoring."
For example, "It took Uber almost 2 years to realize that very few people in this region have a credit card," he said. "That's a very basic thing. It's 101 in this region."
Read more: The CEO of Careem explains how the company is scaling up to beat Uber in a quickly growing market
At the time, Sheikha ruled out an acquisition, and said the company was continuing to fundraise. That's clearly no longer the case.
In an email to Uber employees, CEO Dara Khosrowshahi called Sheikha and his co-founder, Magnus Olsson, "first-class entrepreneurs." Here's his company-wide email, as provided by Uber:
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle EastFive years ago, Uber launched in Dubai. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that's become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey-well, it's more like a leap, and a big one: in a few minutes, we'll announce that we've agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I've gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products-from digital payments to food delivery-to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don't expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams' day-to-day operations post-close.
Today's news is a testament to the incredible business our team has worked so hard to build. It's a great
day for the Middle East, for the region's thriving tech sector, for Careem, and for Uber.Uber on,
Dara