Its final, Uber and Grab have reached an agreement where Uber will sell all of it's South East Asian operations including UberEats to Grab.
The deal, which is similar but not the same in style to the Uber-Didi and Uber-Yandex deal, will give Uber a 27.5% share in Grab as well as seats on the executive board. Uber will now have connections to Grab, as well as with Didi and Yandex.
Uber's deal with Grab is slightly different from the other deals in that Didi invested $1 billion in Uber, and as part of the Yandex merger, they created a joint venture where Yandex has a majority stake. Grab is buying all of Uber's Southeast Asia assets, folding them into its own operations.
Grab has operations in over 190 locations in eight countries that include Singapore, Malaysia, Indonesia and Vietnam, and the new deal is considered to be a win-win for both sides. Uber consolidates its losses in the area but retains interest through its percentage of holdings in Grab. Grab becomes a virtual monopoly in the area and the lack of competition will allow it to concentrate on profits rather than reducing prices constantly.
The passengers of both sides enjoyed the competition, but while fare reduced in value, companies lost more money.
Anthony Tan, Grab CEO
The grab was the more popular rideshare company in the area, now it will be the only rideshare company, until rivals Go-Jeck, Didi and Ola consider expanding outwards.
The surprising part of the deal was the sale of Uber's highly successful Uber Eats part to Grab. Grab has branched into a lot of lucrative side businesses, including food deliveries, so UberEats is a natural extension of its services in the area.
Uber CEO, Dara Khosrowshahi told the media that the deal was "a testament to Uber's exceptional growth across South East Asia over the last five years. It will help us double down on our plans for growth as we invest heavily in our products and technology to create the best customer experience on the planet."
Anthony Tan, Founder of Grab, concurred and added that the new deal "marks the beginning of a new era," and that "The combined business is the leader in platform and cost efficiency in the region. Together with Uber, we are now in an even better position to fulfill our promise to out serve our customers."
Khosrowshahi summed up the deal by saying "One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors. (The deal) puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don't."
The SoftBank effect
The merger doesn’t come as a surprise, SoftBank, a major investor in Uber, Grab and Didi, has made it quite clear that it wants to reduce the competition in sectors around the globe. Raise profitability and allow companies the chance to grow without fiercely defending themselves through constant price
Tan added to the press that "We want to be that app that allows you to buy your coffee, earn your rewards and then after that, you want to buy your lunch and order in, have your food delivered, so you don't have to go through the traffic jam. And when you're that relevant, that real to every customer across the 600 million bases, then you create huge value."
Grab is currently valued at $6 billion and has raised capital to the value of $4 billion.
GrabFood instead of UberEats
The merger allows GrabFood to expand exponentially and will enhance the other services provided by Grab in the area. It will also increase profitability through the GrabPay app, which is Grab's mobile wallet platform.
The Bottom Line
Khosrowshahi explained the rationale behind the deal "I'm conscious that much of the hard work happened before I arrived, and I want to recognize the operations you have built across these eight countries. After investing $700 million in the region, we will hold a stake worth several billion dollars, and strategic ownership in what we believe will be the winner in an important global region."