Monday, March 26, 2018

Uber/Grab and Uber/Didi - Further Examination Of The Deal

Grab is now well on its way to a lucrative IPO following the Uber deal. The deal makes so much sense for all. Uber divested its China ops to Didi and got a substantial stake, the same with Grab. By opting out of the fight, basically it elevated both Didi and Grab into highly listable vehicles.

Mega-potential tech IPOs are getting better at financial acumenship.  Its not always market share. The key is by opting out, Uber need to spend so much  less to burn in those regions. What you do not burn, it goes straight to the bottom line. Secondly, you get equity stakes that elevate your inherent "assets",  which will further lift your own valuation. Thirdly, the moves will allow Didi and Grab to attain much better IPO valuations. Fourthly, it will lock up "regions" for each of them, so as to not needing to fight them tooth and nail in every corner of the globe.

However, this strategy should only work if there are truly just the two of you in a market. If you wish to duck it out more when its a duopoly, it will be a long and expensive fight as both sides keep raising new funds to quash the other side.

I am surprised that there has been no government intervention in these deals because they are really duopolies which are taking advantage of the market conditions at the expense of consumers. I DOUBT VERY MUCH these type of deals will pass in an E.U. setting. Kudos to them to negotiate such deals in "monopoly/duopoly friendly" jurisdictions.

I'd do the same thing if I was any of them, I would also speed up to list before "new rules" comes in on duopolies to prevent any kind of "collusion" (seeming or apparent) or to give rise to "the erosion of a competitive market" or actions "that are not in the interest of the consumer". An immediate group which will not like the deal- the drivers.

SINGAPORE: Uber Technologies Inc. has reached an agreement to sell its South-East Asian ride-hailing business to rival Grab and could announce the deal as early as Monday morning in Singapore, people familiar with the matter said.
The agreement – which includes all of Uber's operations in South-East Asia as well as Uber Eats in the region – gives Uber a stake of between 25% and 30% in the new combined business, they said, asking not to be identified ahead of an official announcement.
The deal, which Bloomberg outlined earlier this month, marks Uber's operational exit from yet another major market and hands a victory to Grab.
SoftBank Group Corp, a major backer of Grab and Uber as well as China's Didi Chuxing, has pushed consolidation to improve the profitability of a global ride-hailing business that bleeds billions of dollars a year. New entrants and the strength of second-place regional players such as Lyft Inc in the U.S. has complicated those efforts.

The deal represents another major retreat from international markets for Uber.
Travis Kalanick, Uber's former chief executive officer, sold Uber's business in China in 2016 in return for a 17.5% stake in Chinese ride-hailing leader Didi Chuxing. Then Uber agreed to sell its Russian business to Yandex – just before after Dara Khosrowshahi took over as chief executive.
Khosrowshahi has been pushing to clean up the company's financials in preparations for an initial public offering next year. Pulling out of markets like South-East Asia would boost profits at a company that has burned through US$10.7bil (RM41.92bil) since its founding nine years ago.
Khosrowshahi signalled during a trip through Asia last month that he is committed to key markets such as Japan and India.
Grab, which has more than 86 million mobile app downloads, currently offers services in more than 190 cities across Singapore, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, Myanmar and Cambodia. – Bloomberg


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