Uber cedes Russia to Yandex in US$3.7B merger

A Yandex.Taxi car and an Uber car drive on a street in Moscow on Thursday. Uber announced it was merging in Russia and five other ex-Soviet states with Yandex. 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,” PierreDimitri 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 about Uber’s continued losses in India and Southeast 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.

Kalanick and his longtime deputy Emil Michael both helped negotiate the deal in Russia before they were pushed out of Uber last month, people familiar with the matter said.

They were key deal-makers for Uber. Under their watch, the firm inked an armistice with Didi last year, partnerships with automakers Daimler AG and Toyota Motor Corp., and with credit card companies including American Express.

Cameron Poetzscher, Uber’s vice-president of corporate development, and Fraser Robinson, the head of business in the region, also played major roles in negotiating the deal with Yandex.

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 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 US$1.01 billion on an annualized 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 ridehailing companies will continue to be offered, while the driver app will become a single platform. They will also operate the UberEATS fooddelivery service.