ComfortDelGro to buy 51% of Uber's Lion City rental car firm

TAXI giant ComfortDelGro is taking a majority 51 per cent stake in Uber's rental car business Lion City Holdings, ending months of speculation on how the two partners will team up in the disrupted sector.

ComforDelgro and Uber said in a joint statement that the deal, "valued at about $642 million, with a cash consideration of $295 million, ranks as ComfortDelGro's single largest deal to-date".

The bold move will put ComfortDelGro's taxis and Lion City Rental's private-hire cars - which total 14,000 units - under a centralised fleet management system, which will handle the despatching of vehicles to customers.

ComfortDelGro chief executive Yang Ban Seng called the partnership a "win-win". "Uber will benefit from our fleet maintenance and management capabilities while we will benefit from Uber's world class technology. At the same time, consumers will have even more choice with either taxis or private hire vehicles, shorter waiting times and greater reliability."

It will also create a path for ComfortDelGro's taxi drivers to receive ride requests on the Uber app, thereby increasing their potential earnings, the company added.

Singapore Management University associate professor Terence Fan, who specialises in transport, said ComfortDelGro's acquisition was a "shrewd move", as it now has more control over how Uber will grow in Singapore. Lion City's fleet accounts for the bulk of Uber's supply of cars in Singapore.

Prof Fan said such control can help ComfortDelGro stem the loss of revenue from its taxi rental business, which has come under stiff competition from the private-hire car sector. Its taxi fleet has shrunk by more than 14 per cent - as at October this year, it had 14,306 cabs across its Comfort and CityCab brands, down from 16,722 cabs in the same period last year.

Assistant professor Yang Nan, of the National University of Singapore Business School's strategy and policy department, said the alliance will help ComfortDelGro and Uber compete against rival Grab, which itself has partnered the other five taxi companies.

In the past months, Grab has also been aggressively wooing ComfortDelGro's taxi drivers to join them, by dangling guaranteed fare earnings and rental rebates.

Prof Yang said the point-to-point, on-demand transport industry is moving to a duopoly with two major consortiums, Grab with its partners and Uber with ComfortDelGro. "Regulators should be cautious in approving this and further acquisition deals. When the market consolidates, the firms' power in pricing generally increases, which often hurts consumers and drivers." The deal is subject to regulatory approval.

ComfortDelGro first announced in August a possible alliance with Uber. Its statement on Friday said the S$295 million tag was arrived at based on Lion City's NTA of about S$642 million based on the value of about 12,450 vehicles. It will pay for more vehicles when utilisation rises.

The value is more than the S$203.7 million it paid earlier this year to buy out the remaining 49 per cent stake in its Australian venture, ComfortDelGro Cabcharge. Upon completion of the deal, Uber will hold 49 per cent of Lion City.