Ride-hailing firm Uber Technologies has agreed to sell its Southeast Asian business to bigger regional rival Grab, the firms said in a statement on Monday, marking the US company’s second retreat from an Asian market.
The deal is the industry’s first big consolidation in Southeast Asia, home to about 640 million people, and puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet’s Google and China’s Tencent Holdings Ltd, reports Reuters.
A shake-up in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based SoftBank Group Corp’s Vision Fund made a multi-billion dollar investment in Uber. SoftBank also invested in Grab.
As part of the transaction, Uber will take a 27.5 per cent stake in Singapore-based Grab and Uber CEO Dara Khosrowshahi will join Grab’s board.
“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said in a statement.
For Grab, the deal is a boon for its meal-delivery service, which will now merge with Uber Eats. A more robust food service will give Grab an advantage over Go-Jek, according to a person close to Grab.
“It was really a very independent decision by both companies,” Grab President Ming Maa told Reuters news agency, adding that SoftBank CEO Masayoshi Son was “highly supportive”.
In addition to its stakes in Uber and Grab, SoftBank is also one of the main investors in several other big ride-hailing firms including China’s Didi Chuxing and India’s Ola.
Ride-hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.
Uber, which is preparing for a potential initial public offering in 2019, lost $4.5 billion last year and is facing fierce competition at home and in Asia, as well as a regulatory crackdown in Europe.
Uber invested $700 million in its Southeast Asia business, less than the $2 billion it burned through in China before ceding its operations there to Didi.