What the Uber-yan­dex Merger means for Uber

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A year af­ter sell­ing its Chi­nese busi­ness, Uber has now de­cided to join hands with Yan­dex, the Rus­sian search en­gine gi­ant and op­er­a­tor of ride-hail­ing ser­vice Yan­dex.taxi. The yetto-be named com­pany un­der the Uber Yan­dex merger will be worth $3.75 bil­lion. The jointly op­er­ated ride-hail­ing busi­ness will span across 127 cities and 6 coun­tries. (Rus­sia, Ar­me­nia, Azer­bai­jan, Be­larus, Ge­or­gia and Kaza­khstan.)

Ac­cord­ing to the terms of the deal be­tween Yan­dex and Uber, Ti­gran Khu­dav­erdyan, the CEO of Yan­dex.taxi, will serve as the chief ex­ec­u­tive of the joint ven­ture.

Uber will in­vest $225 mil­lion and hold a stake of 36.6 per­cent. Mean­while, Yan­dex will in­vest $100 mil­lion of its own and re­tain a 59.3 per­cent ma­jor­ity stake in the jointly op­er­ated busi­ness. All re­main­ing shares are held by com­pany em­ploy­ees.

The deal is yet to re­ceive reg­u­la­tory ap­proval and other con­di­tions.

Yan­dex, of­ten re­ferred to as the “Google of Rus­sia” is a well-known brand and has a broad map­ping data­base. For ob­vi­ous rea­sons, this gave Yan­dex.taxi a com­pet­i­tive ad­van­tage over Uber. Rather than fight­ing over mar­ket share, Yan­dex and Uber de­cided to merge their ride­hail­ing busi­nesses.

Uber launched in Moscow three and a half years ago. It now op­er­ates in 16 cities in Rus­sia. While Yan­dex has gross book­ing of over $1.01 bil­lion on a yearly ba­sis, Uber has just a sweet half of that at $566 mil­lion. In the long run, the Uber Yan­dex merger will elim­i­nate an ag­gres­sive

com­pe­ti­tion from the out­side, and lead to im­proved prof­itabil­ity. An­other po­ten­tial up­side is that Uber will also con­trib­ute its UBEREATS food de­liv­ery busi­ness to the new ven­ture.

In re­cent years, Uber has faced dif­fi­cul­ties in re­gions where the gov­ern­ments does not al­ways wel­come for­eign busi­nesses. Last year, it sold its Chi­nese busi­ness to lo­cal ri­val Didi Chux­ing in re­turn for re­ceiv­ing a 17.5 per­cent stake in Didi, then val­ued at $355 mil­lion.

The same can be said for Yan­dex, which has faced fierce com­pe­ti­tion to hold on to its dom­i­nant po­si­tion in the Rus­sian mar­ket. With Uber equally spend­ing, it can stay in the game and be­come a mar­ket leader.

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