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Uber Merger With Russian Rival Yandex On The Horizon: Another Loss For The Ride-Hailing Service After Exiting China

14 July 2017, 9:47 am EDT By Aaron Mamiit Tech Times
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Uber taxis petrol-bombed in South Africa
Uber has been placed on a tight leash by the FTC, as the ride-hailing service agreed to a settlement over various charges. One of the requirements is for Uber to go through data privacy audits for the next 20 years.  ( Carl Court | Getty Images )

Uber has suffered another setback in what was once a very aggressive plan for international expansion, as the company has agreed to a merger with Yandex for their ride-hailing services in Russia and five countries in Eastern Europe.

The merger follows Uber's exit from China last year, when the company sold its operations in the Asian country to rival Didi Chuxing for $35 billion.

Uber To Merge With Yandex

In an Uber Newsroom post, the company announced the plan to form a new company that will merge Uber's Rides and Eats business with the ride-hailing services of Yandex in Russia, Azerbaijan, Belarus, and Kazakhstan. The merger will also cover Armenia and Georgia, despite Uber not yet operating in these two countries.

The terms of the transaction highlight how Uber has yielded Russia to Yandex. Uber will invest $225 million into the new company, but will only have a 36.6 percent stake and have three of the seven seats in the board. Meanwhile, Yandex will invest $100 million, but will own a 59.3 percent stake in still unnamed company.

Tigran Khudaverdyan the head of the Yandex.Taxi business in Russia, will serve as the CEO of the new company. The combined business will handle about 35 million requested rides monthly.

For Uber, instead of fighting with the so-called Google of Russia for market share, initiating a merger with Yandex made more sense, especially with the other issues that the company has found itself in. The deal is expected to close within the last three months of the year, but the apps of Uber and Yandex will continue to function separately for the foreseeable future.

Uber In Trouble?

With Uber pulling out of its second major market, the dominant ride-hailing service in the United States finds itself in even bigger trouble.

Uber has been rocked by a multitude of scandals, including a legal battle against Alphabet's self-driving unit Waymo over self-driving technology and sexism in the company, among many others.

Former Uber CEO Travis Kalanick, who initially filed for a leave of absence but then later decided to resign to accommodate the requests of shareholders, helped negotiate the deal with Yandex alongside former Uber senior VP of business Emil Michael.

The deal with Yandex could be a sign of things to come for Uber, as ride-hailing markets around the world continue to be very fiercely competitive. For some countries where Uber has been piling up losses, the company may also soon start looking to strike deals with competitors to stop the bleeding.

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