If you can’t beat them, join them: that’s the strategy Uber CEO Travis Kalanick is trumpeting today as his company starts moving toward a merger with its biggest rival, Didi Chuxing.
Under terms of a new deal announce today, Uber China, the San Francisco-based company’s Chinese subsidiary, will merge with the aforementioned Didi, the country’s largest ride sharing company. In return, Didi will make will a $1-billion investment in Uber proper.
Once finalized, Uber China’s investors will own a 20 percent stake in the merged company, which is expected to be worth approximately $35-billion due to the combined valuation of Uber China and Didi Chuxing.
Most analysts say the the move represents a retreat from the Chinese market on Uber’s part.
While the company has dominated in almost every country it has set foot in, China has proven something of an enigma.
Since the start of 2015, the company has raised more than $7-billion in startup capital, much of it earmarked toward winning in the Chinese market. Despite the company’s investments in China, it has never turned a profit there; in fact, according to Business Insider, neither has Didi Chuxing.
“Three years ago, I traveled to China with a small group of people to see if we might be able to launch Uber there,” said Travis Kalanick, Uber’s CEO, in a blog post, adding, “Most of the people we asked for advice thought we were naïve, crazy — or both.”
“However, as an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart,” he wrote. “Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there.”