Uber will sell its business in Southeast Asia to a local competitor, Grab, the ride-hailing company announced late Sunday, in a deal that experts say is created to position Uber for an initial public offering next year.
Uber and Grab, together with two other SoftBank-backed ride-hailing firms - India's Ola and China's Didi Chuxing - provide about 45 million rides a day, according to SoftBank presentation material in February. Not only that, Uber also gained a 27.5 percent stake in Grab as a result of selling their regional assets to the Singapore-based transport network company. He did not want to be identified as the deal is not public yet.
"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 victor in an important global region", Khosrowshahi wrote in his missive to staffers.
Khosrowshahi, who is joining Grab's board as part of the agreement, said: "This deal is a testament to Uber's exceptional growth across Southeast Asia over the last five years".
Expectations of consolidation in Asia's fiercely competitive ride-hailing industry were stoked earlier this year when Japan's SoftBank Group Corp made a multi-billion dollar investment in Uber. "It will help us double down on our plans for growth".
"Today's acquisition marks the beginning of a new era", said Anthony Tan, Chief Executive Officer of Grab.
Grab will extend its leadership as it takes over Uber's operations and assets in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
The value of the deal, which Grab said was the largest ever acquisition by a Southeast Asian Internet company, was not disclosed. "The combined business is the leader in platform and cost efficiency in the region".
Uber once wanted to expand all over the world, but on Monday it added to its list of big strategic retreats-with a little encouragement from its biggest investor these days, SoftBank. The merging of Uber Eats will further give Grab an advantage over Go-Jek, which also has a vast range of services apart from ride hailing.
Last year, the US-based Uber lost $4.5 Billion as it underwent a fundamental shakeup following a harassment scandal.