Published: Fri, July 14, 2017
Business | By Max Garcia

Uber merges taxi-hailing app with Yandex in Russian Federation

Uber merges taxi-hailing app with Yandex in Russian Federation

As of June Yandex.Taxi was doing more than double the business of Uber even despite the U.S. company's constant price undercuttingg of Yandex.

The CEO of Yandex.Taxi, Yandex's ride-sharing division, will become CEO of the combined business. Uber does not now operate in Armenia and Georgia. 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.

Yandex will hold a majority 59% stake in the new company, Uber will own 36.6% and employees will hold the rest.

Uber's food delivery business UberEats will also be operated by the new company.

Pierre-Dimitri Gore-Coty, Uber's boss in Europe, the Middle East and Africa, said the company's share of the new firm will be worth almost US$1.4bn and it will have three of the seven seats on the board. Still, Uber has become embroiled in internal controversy and litigation back home, and that has perhaps sapped some of the company's desire to compete in Russian Federation and several other Eastern European markets.

Uber's loss before interest, taxes and stock-based compensation totalled US$708mil (RM3.03bil) in the first three months of the year, an improvement from the US$991mil (RM4.25bil) loss in the prior quarter.

"This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business", said Gore-Coty.

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. The Uber and Yandex brands and rider apps will continue to operate as usual which the driver apps will be integrated after the deal closes. "Combining Yandex's local expertise in search, maps and navigation with our leading global experience in ridesharing will enable us to build the best local services and provide a credible alternative to vehicle ownership across the region".

The taxi business is separate from Yandex's other ventures, including Internet search, and an initial public offering of the joint venture is a possibility in the future, Yandex chief financial officer Greg Abovsky said on a conference call.

In Russia, Yandex offers more than twice as many rides as Uber, at about 24 million per month, according to business data shared with investors. "A threat to competition, undoubtedly, is present here", Artemyev said.

The implied valuation for Yandex.Taxi of about US$2bil (RM8.59bil) in the deal with Uber is "substantially" higher than the levels expected by the market, BCS Global Markets said in note to clients on July 13.

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