In a move that goes against its recent trend of pulling out of foreign markets, ride-sharing giant Uber is preparing to purchase Dubai-based competitor Careem in a $3.1 billion deal, according to reports in Bloomberg and the Financial Times this weekend.
Those reports indicated the deal could be signed as early as Monday and announced by Tuesday, though spokespeople for Uber and Careem did not offer comment to Bloomberg. Careem was valued at roughly $1 billion in a 2016 funding round and $2 billion last year, and it currently claims to operate in over 90 cities in 15 countries and have over 30 million users throughout the Middle East, North Africa, and South Asia.
As the Financial Times wrote, a successful sale would be a “historic moment” for the region’s tech and venture capital industries, which has “struggled to produce few high-profile success stories”:
Amazon in 2017 acquired regional e-commerce site Souq.com for around $650m.
“This is a validation for the tech space in the region and everyone that has invested in this space over the past few years,” said one investor.
Uber and Careem are the two dominant companies in their shared territories, meaning the merger could produce a de facto monopoly in some places. Careem’s main backers include Japanese company Rakuten Inc. and the Kingdom Holding Company, an investment firm run by Saudi Prince Alwaleed bin Talal. Engadget noted that the deal may position Uber to receive more funding from the Saudi firm (albeit at a time when some major firms have become skittish about the nation’s atrocious human rights record).
Last year, Careem and Uber dodged a ban in Egypt after a suit from traditional cab drivers claimed that they violated laws on the use of private vehicles and had illegally registered their firms under different industries. Careem and Uber also both operate in Turkey, where last year President Recep Tayyip Erdogan threatened to kick Uber out, and authorities began targeting the company’s taxis and passengers for heavy fines. Careem has also faced difficulties in Turkey over similar political problems and scaled back its up-market service there.
Uber has previously used these types of mergers to escape expensive price wars with upstart foreign firms that sprung up in the wake of its worldwide rollout. It merged with competitor Yandex in Russia, sold off its Southeast Asian market to rival Grab, and sold out its Chinese operations to Didi Chuxing. The departure from historical strategy comes as Uber approaches an initial public offering, which is reportedly coming as soon as April and could value the company as high as $120 billion.
