By Greg Bensinger, Newley Purnell and Julie Steinberg
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 9, 2018).
Uber Technologies Inc. has reached an agreement in principle to
sell most of its Southeast Asia operations to local rival Grab
Inc., ending a costly fight for market share in the fast-growing
region, according to people familiar with the matter.
In exchange for its operations in Southeast Asia, Uber would
gain a roughly 30% stake in Grab, these people said. The two
companies are still hashing out the final terms of the pact, the
people said, cautioning any deal would be subject to regulatory
scrutiny. One of the people said Uber's stake in Grab could wind up
being smaller.
Uber was spending some $200 million annually to take on Grab and
another upstart in the region, PT Go-Jek Indonesia, two of the
people said. Go-Jek, a motorcycle-taxi service based in Indonesia,
recently raised more than $1 billion in funding from KKR & Co.
and Tencent Holdings Ltd., among others.
Uber and Grab spokeswomen declined to comment.
Bloomberg News earlier reported a deal was near to being
reached.
A deal could relieve pressure on new Uber's chief executive,
Dara Khosrowshahi, who is trying to shore up the company's finances
ahead of an expected 2019 initial public offering. Uber posted a
net loss of $4.46 billion in 2017 on sales of $7.36 billion.
Since taking the helm in September, Mr. Khosrowshahi reached an
agreement to sell the company's money-losing car leasing business
in the U.S. and settled a distracting lawsuit from Alphabet Inc.
over allegedly stolen trade secrets.
In recent weeks, Mr. Khosrowshahi vowed to keep fighting for
market share in Southeast Asia, even in the face of hefty
losses.
"We expect to lose money in Southeast Asia and expect to invest
aggressively in terms of marketing, subsidies," he told reporters
during a visit to New Delhi last month. Earlier in the month he
said Uber was investing hundreds of millions of dollars in the
region but that it is difficult to compete against locals.
"The economics of that market are not what we want them to be,"
said Mr. Khosrowshahi.
Uber has shown a willingness to cut its losses in markets where
it is struggling to maintain market share. Last year it reached a
deal to merge its Russian operations with Yandex.Taxi, forming a
joint venture with parent company Yandex NV in exchange for a
nearly 37% stake. And in 2016 it sold its Chinese business to Didi
Chuxing Technology Co., amassing a 20% stake in Didi in the
deal.
The talks with Grab involve all of Uber's major assets in the
region, but a final deal could exclude small pieces of the
Southeast Asian operations, people familiar the discussions
said.
A deal would speak to the investment strategy of SoftBank Group
Corp., which took a 15% stake in Uber in January for $7.7 billion.
The Japanese firm is also a major stakeholder in Grab, Didi and ANI
Technologies Inc.'s Ola, whose home market is India.
Beijing-based Didi is expanding to Japan in competition with
Uber and recently bought out Brazil's 99Taxis, a popular taxi cab
app. Meanwhile, Ola and Uber are duking it out in Australia.
Uber, which is based in San Francisco, expects to seat Sprint
Corp. chief Marcelo Claure and SoftBank partner Rajeev Misra on its
board after a review of the SoftBank deal is completed by the
Committee on Foreign Investment in the U.S.
Uber and Grab have been racing to dominate the roads of
Southeast Asia, home to 600 million people. The region's
ride-hailing market is forecast to grow more than five times to
$13.1 billion by 2025 from $2.5 billion in 2015, according to a
report from Alphabet Inc.'s Google and Singapore state-investment
firm Temasek Holdings.
While Uber has tangled with regulators around the globe, Grab
says it works closely with government authorities and better
understands local habits. In the Philippines, for example, it
offers rides on widely popular motorcycles with covered
sidecars.
Grab has more monthly active users across much of the region
than Uber, according to app analytics firm App Annie. A May 2017
report from consultancy Bain found users across Southeast Asia
prefer Grab to Uber.
In Indonesia, the region's biggest country by population, both
Uber and Grab are also grappling with GoJek. GoJek has rapidly
expanded from offering transportation to services such as package
and food deliveries.
--P.R. Venkat contributed to this article.
Corrections & Amplifications Uber's Chief Executive is Dara
Khosrowshahi. A photo caption in an earlier version of this article
incorrectly spelled his last name.
Write to Greg Bensinger at greg.bensinger@wsj.com, Newley
Purnell at newley.purnell @wsj.com and Julie Steinberg at
julie.steinberg@wsj.com
(END) Dow Jones Newswires
March 09, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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