Uber cedes Russia to Yandex with US$3.7b merger agreement

[SAN FRANCISCO] Uber Technologies is handing over the keys to its business in Russia.

The San Francisco-based company and Yandex NV are merging their ride-hailing businesses in Russia. Uber will invest US$225 million and take a 36.6 per cent stake in a new, yet-to-be named venture that will be valued at US$3.73 billion, the companies said in a statement Thursday. Moscow-based Yandex will invest US$100 million and own 59.3 per cent of the new enterprise.

The deal with Yandex is Uber's second retreat from a major market. Last year, Uber left China in exchange for a 17.5 per cent stake in rival Didi Chuxing, after losing more than US$2 billion battling its competitor.

While Uber remains the dominant ride-hailing operator in the US, it has been on the defensive, beset by scandals that led to Travis Kalanick's ouster as chief executive officer.

The agreement with Yandex is part of Uber's renewed effort to improve revenue, narrow losses and resolve its legal issues.

"This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business," Pierre-Dimitri Gore-Coty, Uber's chief for Europe, Middle East and Africa, said in the statement.

Tigran Khudaverdyan, head of Yandex.Taxi in Russia, will become CEO of the combined enterprise, Uber and Yandex said. Together, their businesses handle 35 million rides a month, and will also operate in Kazakhstan, Azerbaijan, Armenia, Belarus and Georgia. The deal is expected to close in the last three months of 2017.

Uber's exit from Russia could be a precursor to more deals in other big, fiercely competitive ride-hailing markets.

Investors have raised questions as recently as this month about Uber's continued losses in India and South-east Asia, asking privately whether the company would be better served by cutting deals with market leaders Ola and Grab, two people familiar with the matter said.

Uber's loss before interest, taxes and stock-based compensation totalled

US$708 million in the first three months of the year, an improvement from the US$991 million loss in the prior quarter. Losses narrowed further in the latest period, Uber recently told investors.

Net revenue was US$1.5 billion in the first quarter, according to its more conservative accounting method.

In Russia, Yandex.Taxi has gross bookings of $1.01 billion on an annualised basis, while Uber had US$566 million, according to a presentation prepared for investors.

The new, unnamed company "will have the right to use Yandex.Taxi and Uber brands in the region," the companies said.

Apps from both ride-hailing companies will continue to be offered, while the driver app will become a single platform. They will also operate the UberEATS food-delivery service.

"Many of us who work inside Yandex feel that everyone has already switched to ride-sharing, but in reality, we are just at the beginning of this journey," Mr Khudaverdyan wrote in a blog post.

BLOOMBERG