Uber chief Travis Kalanick ends socialism in China

Uber China’s merger with Didi Chuxing would end the local taxi wars at two of the world’s most high-value startups


Travis Kalanick, chief executive officer of Uber Technology Inc. Photo: Bloomberg
Travis Kalanick, chief executive officer of Uber Technology Inc. Photo: Bloomberg

Taipei: Jean Liu has won and Travis Kalanick has, well, not quite lost.

Kalanick, the chief executive of Uber, has taken a pragmatic step and decided to merge the company’s China operations with local ride-hailing rival Didi Chuxing, run by Liu. The valuation of the combined group would be $35 billion, people familiar with the matter told Bloomberg News.

In what amounts to the understatement of the year, Kalanick summarizes his reason for the move in a blog post as such:

“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there.”

Also Read: Didi buys Uber China, ending costly start-up battle

Uber has lost more than $2 billion in China, the people familiar said. As part of the deal, investors in Uber China, an entity owned by San Francisco-based Uber and Baidu among others, will receive a 20% stake in the combined company. That share swap makes a nice $7 billion windfall for Uber China shareholders, but alas, it’s not a cash payout.

Even more spectacular for Uber is that Didi will make a $1 billion investment in the US firm. That’s cash Uber needs to fund its global expansion. (As an aside, considering Apple bought a stake in Didi, this transaction in theory now makes Apple a shareholder of Uber.)

The deal is well timed, probably deliberately so. Beijing just recently unveiled new rules legalizing ride-hailing services, dispelling any lingering regulatory uncertainty.

Also Read: Why Uber can’t afford to lose in India

Last month, I wrote about how a truce would have ramifications beyond China. Didi’s tie-ups overseas with the likes of Lyft, Olacabs and Grab make it a global threat, and one Kalanick needs to tackle quickly if he’s to bring an end to the massive ride-hailing socialism that’s transferring investor cash to freelance drivers.

Kalanick also writes in the aforementioned blog post that “as an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart.”

In actual fact, it’s investors Kalanick has started listening to. A sure sign socialism will end, and capitalism can begin. Bloomberg

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