While Uber keeps on trying to navigate its way through a vast volume of in-house administrative turbulence, the ride-hailing giant company is alsomerging and rationalizing more of its global business. Just about a week ago, the company made it public that it will be merging UberEATS, its food ordering and delivery service and its rides-on-demand business, in Russia and adjoining markets, with Yandex.Taxi. Uberdeclared that it will be fusing both UberEATS and its ride-hailing business with Yandex.Taxi, the ridesharing venture developed by the Russian search giant over many years and the present frontrunner in the market, in what will be a distinct, joint venture with a value of $3.72 billion. The transaction, which will include active operations in six countries namely Russia, Armenia, Georgia, Azerbaijan, Belarus, and Kazakhstan, is anticipated to close in the fourth quarter of this year and has already been sanctioned by both companies’ boards. It’s an extensive operation. At present, it includes thirty-five (35) million trips every month across a staggering one hundred and twenty-seven (127) cities, with the majority stemming from Yandex.Taxi portion of the joint venture; Uber was just present in twenty-one (21) cities. The chief executive officer of Yandex.Taxi, TigranKhudaverdyan, said in a statement: “this combination greatly boostsYandex’s ability to offer improved quality service to our drivers and riders, to speedilygrow our services to new regions, and to build a viable business.” He continued: “the combined companies at present perform over 35 million rides a month while growing over 400% year by year. Since setting upYandex Taxi in 2011, we have linked tens of millions of drivers and riders to become the leading and most trusted ridesharing business in Russia and bordering countries.”
Khudaverdyan concluded by saying this: “we at Yandex.Taxiare excited to expand on this base in collaboration withUber.” Khudaverdyan will assume the position of Chief Executive Officer of the combined company. The companies are also each committing capital into the deal: Yandex is committing $100 million and Uber $225 million. This gives Uber a 36.6% share and Yandex a 59.3% share, with the remaining 4.1% owned on a wholly diluted basis by the workforce of the company. In the conference call today, the two companies opined that one strong choice will be for the new venture to in due course go public; Uber, of course, remains private, while Yandex is traded publicly. This is a big step and comes after Uber shoving its global venture in Asia last year, precisely in China where it sold to Didi its Uber China thereby putting an end to many years of a rather bitter and very costly competition there. It is not wrong to say the same for the Russian market, where Yandex leads the market but has been in a tough competition to keep up that stance, with Uber as well spending a lot – as it has always done in other markets – to be relevant with anultimate goal to take over. Due to many alterations in the business back at home in the U.S. – to wit, the recent stepping down of foundingchief executive officer Travis Kalanick, amid an array of scandals including bad managing practices as well as sexual harassment – the company seems to be having a broader thinking of its entire strategy. Whether the ride-hailing company can live up to its valuation of $68 billion as a result of all of its crises is a pertinent and constant question now on the lips of some. A host of regional contenders, in the meantime, keep on raising funds in a move to place themselves as reliable options .
Uber maintains that it has until now invested something to the tune of $170 million to build and improve its venture, which is now operative in twenty-one cities in the region. Pierre-Dimitri Gore-Coty, Head of Uber in Europe, Africa, and the Middle East has this to say: “Not only is this partnership good news for the two companies, it is also great for drivers, riders and cities across the region. This deal is a proof of our remarkable growth in the region and helps Uber to keep on building a viable global business” It has been said on a number of occasions that the strength of Uber is not just in terms of offering low-cost rides.
In effect, that means the company has to put in great sums not just in marketing and acquisition of customers but also tech research and development. To achieve all of these, in fact, can prove to be expensive in those markets where the company is still not so big a player. Yandex is at a vantage point for the reason that it before now had a far-reaching maps service – just like its United States equivalent, Google – and it will be bringing into this operation that valuable IP. But in the way it has been creating a big and potent logistics business.
In a statement, Yandex said: “NewCo will draw on the strengths of Uber, the leader in ridesharing globally and Yandex, the region’s frontrunner in search, maps and navigation to build a fast-growing viable business that best meets the needs of drivers, riders, and cities.” Consumers and customers will be able to use both Uber and Yandex apps while the driver-side apps will be joined after the eagerly awaited due closing of the business deal. This will provide the entire service with a much bigger pool of drivers (if one assumes that there would not be by that time a lot of overlays), as well as more passengers at existing users .