Uber and Yandex, a Russian ride-hailing rival, join forces in Eastern Europe

SAN FRANCISCO — Uber is famous for its pugnacious approach to business and willingness to fight any and all competition. But in a handful of countries, the ride-hailing company has ended up on a more conciliatory path.

The latest example: On Thursday, Uber said it had formed a partnership with Yandex, the Russian search giant and operator of the ride-hailing service Yandex.Taxi. The two companies will combine their ride-hailing businesses in Russia and several other Eastern European countries under a new, yet-to-be-named company.

The deal, which must receive regulatory approval, will value the new company at $3.4 billion. It will be jointly operated by Yandex and Uber, with Tigran Khudaverdyan, the chief executive of Yandex.Taxi, as chief executive of the new venture. Uber will invest $225 million, while Yandex will invest $100 million of its own and retain a majority stake in the new company.

“Together, we will continue to build a ride-sharing service that offers a viable alternative to automobile ownership or public transportation,” Mr. Khudaverdyan said in a news release.

The move is a rare détente for Uber, known for its aggressive approach to entering global markets, and will end a costly battle between the two companies that has dragged out over the past three years since Uber arrived in Russia. It also comes during a trying time for the company, just weeks after Travis Kalanick, a co-founder, resigned as chief executive.

But the deal reflects the intense competition Uber has sometimes faced in its aggressive overseas expansion. Last year, Uber realized it was outmatched in China, where the company spent billions of dollars in rider subsidies to gain a foothold against Didi Chuxing, the incumbent ride-hailing app there. After a protracted fight, Uber sold its Chinese subsidiary company to Didi Chuxing and formed a new, separate company operating in the region. Uber retains a 17.5 percent stake in that business.

Uber faced similar difficulties against Yandex in Russia and the other countries in which Yandex.Taxi operates, including Armenia, Azerbaijan, Belarus, Georgia and Kazakhstan.

Yandex is an incumbent in a region where the government does not always welcome foreign business. Moreover, the company, often called the “Google of Russia,” owns and operates a significant mapping database, an advantage over Uber. And Yandex, a well-established internet brand in Eastern Europe, is able to heavily market its services to potential customers through its online properties — a luxury Uber does not have.

Players on both sides say that rather than spending money fighting for market share, a deal made the most sense. Users will benefit from shorter wait times, the companies said, as well as more reliable service. They will also be able to take advantage of global “roaming”; Yandex.Taxi customers may use the app in countries in which Uber operates to call cars, which will be fulfilled by Uber’s drivers. Uber customers, similarly, will be able to do the same in areas in which Yandex.Taxi is the predominant ride-hailing service.

The deal has been in the works for months, with executives like Emil Michael, Uber’s former senior vice president of business, and Cameron Poetzscher, Uber’s current vice president of corporate development, determining the details.

“This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business,” Pierre-Dimitri Gore-Coty, head of Uber in Europe, the Middle East and Africa, said in a news release.

As part of the deal, Uber will retain a 36.6 percent stake in the new company, which has the placeholder title “NewCo,” while Yandex will hold a 59.3 percent stake; 4.1 percent will be held by employees of the venture. Combined, it will operate in 127 cities across six countries. Between the two operations, more than 35 million rides were completed in June, responsible for more than $130 million in gross bookings.

Winding down expensive battles among competitors will also help assuage investor concerns about Uber’s spending, which over the past few years has remained high as the company burns cash to expand its ridership. Uber lost nearly $1 billion over the fourth quarter of 2016, though it has started to shore up losses in some markets; Uber lost $708 million in the first three months of 2017.

Reining in spending will probably sit well with investors, who are pushing for an initial public offering, which may soon become a reality. Uber is searching for a chief financial officer and new chief executive, and is appointing other important executive positions in preparation for an eventual move to the public markets.

Yandex and Uber expect their deal to close by the end of the year.

Source: Tech CNBC
Uber and Yandex, a Russian ride-hailing rival, join forces in Eastern Europe