In Russia, Uber will be joining forces with its largest rival Yandex, agreeing to a merger with the company’s taxi operations.
Merger With the ‘Google of Russia’
Yandex, known as the “Google of Russia,” will be the leading partner in the deal, which has been valued at $3.7 billion USD.
Yandex will own a 59.3 percent stake in Uber while investing $100 million. Uber, on the other hand, will own just under 40 percent of the new company while putting in $225 million.
Some local analysts have called it a “good deal” for Yandex as it “eliminates an aggressive competitor,” which they say will help long-term monetization profitability.
Furthermore, Otkritie brokerage analyst Timur Nigmatullin estimated that, before the deal, Yandex’s ride-sharing division made up about 20 percent of its parent company’s market cap.
After the deal, Yandex.taxi may now account for up to 50 percent of Yandex’s total equity value.
Uber will also offer its UberEATS service to the new venture as part of the deal.
Additionally, Yandex.Taxi chief executive Tigran Khudaverdyan will become CEO of the combined business with Yandex holding four board seats and Uber holding three.
Uber Continues to Struggle With Overseas Expansion
Almost immediately, Uber’s newest merger has been compared to its previous merger with Didi Chuxing in China.
Like Yandex, Didi Chuxing was by far the dominant regional ride-sharing force in its country at the time. In fact, Didi Chuxing is actually the largest ride-sharing company in the world by rides serviced, with 1.4 billion rides completed in 2015 alone.
Comparatively, by 2015 Uber had completed only 1 billion rides since its founding in 2009.
In both instances, Uber was outperformed by an entrenched local competitor that had obtained significant control of the ride-sharing market before Uber was even able to make its presence known.
Thus, the Yandex deal is yet another uphill battle for the U.S. ride sharing giant — and basically consolidates Yandex’s control over the Russian market.
However, some see the repeated price wars with overseas players as a strategic move.
One such person is Arun Sundararajan, a professor at New York University’s Stern School of Business, who told the Washington Post that Uber’s efforts in these countries have always been about striking a deal.
“It’s a natural conclusion in an effort to gain market share where there is a large domestic competitor. It allows Uber to strike a deal. Neither company has to fight the price war anymore.”
What do you think of Uber’s merger with Yandex and its continued struggles overseas? Let us know in the comments below.
Images via venturebeat.com, Yandex, and Uber