Uber today announced that it had reached an agreement to acquire its rival in the Middle East, called Careem, for $3.1B.
Careem will be a subsidiary of Uber and operate separately under its own brand (at least for now). The transaction is expected to close in the first quarter of 2020.
Here’s the announcement from Uber:
- Careem to become a wholly-owned subsidiary of Uber, operating as an independent company under the Careem brand and led by Careem founders
- Opportunity for both companies to rapidly expand and capitalise on the region’s underpenetrated mobility opportunity and growing digital economy
- Transaction would be largest-ever technology industry transaction in the greater Middle East region
SAN FRANCISCO AND DUBAI — Uber and Careem have reached an agreement for Uber to acquire Careem for $3.1 billion, consisting of $1.7 billion in convertible notes and $1.4 billion in cash. The acquisition of Careem is subject to applicable regulatory approvals. The transaction is expected to close in Q1 2020.
Uber will acquire all of Careem’s mobility, delivery, and payments businesses across the greater Middle East region, ranging from Morocco to Pakistan, with major markets including Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates.
Upon closing, Careem will become a wholly-owned subsidiary of Uber, preserving its brand. Careem co-founder and CEO Mudassir Sheikha will lead the Careem business, which will report to its own board made up of three representatives from Uber and two representatives from Careem. Careem and Uber will operate their respective regional services and independent brands.
“This is an important moment for Uber as we continue to expand the strength of our platform around the world. With a proven ability to develop innovative local solutions, Careem has played a key role in shaping the future of urban mobility across the Middle East, becoming one of the most successful startups in the region. Working closely with Careem’s founders, I’m confident we will deliver exceptional outcomes for riders, drivers, and cities, in this fast-moving part of the world,” said Uber CEO, Dara Khosrowshahi.
“Joining forces with Uber will help us accelerate Careem’s purpose of simplifying and improving the lives of people, and building an awesome organisation that inspires. The mobility and broader internet opportunity in the region is massive and untapped, and has the potential to leapfrog our region into the digital future. We could not have found a better partner than Uber under Dara’s leadership to realise this opportunity. This is a milestone moment for us and the region, and will serve as a catalyst for the region’s technology ecosystem by increasing the availability of resources for budding entrepreneurs from local and global investors,” said Careem CEO and co-founder, Mudassir Sheikha.
The greater Middle East region is already seeing the economic and social benefits of rapid technology adoption and improved access to transportation. This transaction supports the collective ability of Careem and Uber to improve the region’s transportation infrastructure at scale and offer diverse mobility, delivery and payment options. It will speed up the delivery of digital services to people in the region through the development of a consumer-facing super-app that offers services such as Careem’s digital payment platform (Careem Pay) and last-mile delivery (Careem NOW).
This transaction brings together Uber’s global leadership and technical expertise with Careem’s regional technology infrastructure and proven ability to develop innovative local solutions. Both companies believe it will provide an opportunity to expand the variety and reliability of services offered, at a broader range of price points to serve more consumers. Similarly, for drivers and captains, the companies believe an increase in trip growth and improved services could provide better work opportunities as well as higher and more predictable earnings through greater utilisation of drivers’ time on the road.
Here’s email that was sent to employees by the CEO:
Editor’s Note: The email below was sent today from Dara Khosrowshahi to all Uber employees.
Five years ago, Uber launched in Dubai. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close.
Today’s news is a testament to the incredible business our team has worked so hard to build. It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Here’s the email that Careem sent out to customers:
The Careem brand will stay for now but I don’t think that it makes much sense in the long term to have two separate IT platforms (or even brands).
I cannot remember if I have ever used the service but have had the app on my phone in the past (don’t have it now). If my memory serves right, I have tried to used it few times in the past but it always struggled to accept foreign credit cards (as these services often do).
Consolidation is bad unless there are other players remaining in these markets to keep fares competitive for both riders and drivers.