[Update: Grab has officially announced that Uber will receive a 27.5 per cent stake in Grab; Uber CEO Dara Khosrowshahi will join Grab’s board. It also said that Grab’s food delivery service GrabFood will expand to Singapore and Malaysia, then the rest of Southeast Asia, by the first half of 2018. Uber’s service will operate in Southeast Asia for two more weeks.]
[Update 2: Uber has clarified rumour about a lay-off following the merger announcement.]
The deal would give Uber a 25 to 30 per cent stake in the new business entity formed by the asset purchases in the region. It follows a similar structure to the buyout-for-stake agreement struck between Uber and Didi Chuxing in China in 2016.
Uber’s food delivery service UberEATS will also be sold to Grab in the deal.
Neither Grab nor Uber commented on the deal, but the Bloomberg report stated it could be officially announced as early as Monday in Singapore.
For Grab, the deal essentially eliminates any competition in most of Southeast Asia outside of Indonesia. Go-Jek remains a formidable competitor in the region’s largest country, but it has yet to foray into international waters. Go-Jek is expected to enter the Philippines this year.
While there does not appear to be any major competitors for now, that can change fairly quickly. If China can be used as an example, in 2016 nobody would have predicted that Meituan-Dianping would emerge as a threat to Didi’s dominance in the country. But, that is where we sit today.
For Uber, the deal is another piece of evidence pointing to the company’s desire to IPO in the near future. CEO Dara Khosrowshahi has made it his mission to clean up the company’s finances which had been defined by high-growth but extreme losses under Founder Travis Kalanick.
Khosrowshahi is conceding defeat in Southeast Asia, and therefore eliminating the possibility of global dominance, with the hope that the end result will be a business that operates in, or near, the black ahead of a public offering.
This is no given as rival Lyft has proven to be a strong competitor in the United States and most other markets have an Uber-alternative that has become popular (like Ola in India).
Both companies have received significant investment from Softbank.
Following the merger announcement, rumour started circulating on Twitter on Monday afternoon about Uber laying-off its team in Singapore due to the merger.
There was a video showing what is claimed as Uber employees packing up after being informed to leave the office within two-hours.
An Uber spokesperson told e27 that the Uber Eats team was not being laid off and is instead being transferred to join Grab, in line with the statement that Grab Co-Founder & CEO Anthony Tan has made.
“It is part of the deal with Grab … The Grab team acknowledges the capabilities of the Uber Eats team, that is why they want them. It is all part of the transition process,” he said.
The spokesperson also confirmed that the employees will continue to receive pay and benefits from Uber until their transition is finalised, which may take up to one month.