Uber has decided to merge its ride-hailing business in Russia and neighboring markets with Yandex, popularly known as the “Google of Russia.” Along with its rides-on-demand business, the U.S. firm is also merging its food ordering and delivery business, UberEATS, with the Russian firm. The Russian search-engine giant also runs a popular taxi-booking app – Yandex.Taxi.
Both are paying money in
The deal between Uber and Yandex covers Russia, Kazakhstan, Azerbaijan, Armenia, Belarus and Georgia and is expected to be closed in the fourth quarter of this year. The deal has already been approved by the boards of both companies. Along with merging their operations, both companies are also putting money into the deal. Uber will be investing $225 million, while Yandex is putting in $100 million.
In the new joint company, Uber will hold a 36.6% share and Yandex will own 59.3%, while the remaining 4.1% is owned by the company’s employees. Uber’s 36.6% stake is worth $1.4 billion. The deal results in a massive operational business. Currently, it will cover about 35 million trips covering about 127 cities each month, with the majority coming from the Russian partner.
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In a statement on Thursday, Yandex.Taxi CEO Tigran Khudaverdyan said, “This combination greatly enhances Yandex’s ability to offer better quality service to our riders and drivers, to quickly expand our services to new regions, and to build a sustainable business.”
A lucrative financial deal for Uber
For Uber, the deal marks a pullback from another international market. Last year, the U.S. firm exited China. However, the company terms it a lucrative financial deal and not a strategy of further retrenchment elsewhere.
In a blog post addressed to Uber employees, the head of Uber in Europe, the Middle East and Africa, Pierre-Dimitri Gore-Coty, said, “This is an exciting opportunity in a unique situation and our operations in other countries will not be affected.”
In China, Uber sold its operations to bigger local rival Didi Chuxing. The U.S. firm in return got a 17.5% stake in Didi, which at that time was valued at $35 billion. Based on Didi’s recent funding round that valued it at $50 billion, Uber’s stake in the Chinese firm has increased from $6.1 billion to about $8 billion, notes Reuters.
How the Uber and Yandex deal helps users
Both Uber and Yandex agree that the deal made more sense than wasting money on fighting for market share. Following the deal, users will benefit from shorter wait times and more reliable services. Users will also be able to use the global “roaming” facility, where Yandex.Taxi customers are able to use the app to book cabs in the countries where Uber operates. Similarly, Uber users will be served by Yandex.Taxi drivers in some areas, notes The New York Times.
Once the deal is closed, users will be allowed to use both the Uber and Yandex apps to book rides. For drivers, however, the apps will be integrated into one. Yandex is Russia’s most successful Internet business offering search, maps and transit apps to users. Yandex, which account for 65% of all searches, also offers Web analytics, an app store, a Chrome-like browser and free email.