Uber To Merge With Didi

Uber is said to be merged with its Chinese rival Didi Chuxing, the dominant ride-hailing service in the country. The deal ends a costly battle between the two companies, which competed for customers and drivers.

After the merging, the valuation of the combined company will be $35 billion, said people familiar with the matter. Investors in Uber China, an entity owned by San Francisco-based Uber, Baidu Inc. and others, will receive a 20 percent stake in Didi, the people said. Uber will continue to operate its own app in China for now.

The merger is the latest sign of the challenges American tech companies face in trying to enter the Chinese market. Over the past two years, Uber upended expectations in China and created a growing business in a country despite heavy regulation and internet filters that often keep foreign companies at bay. The early 2015 rollout of People’s Uber, a service that got ordinary Chinese drivers behind the wheel and taking passengers, helped Uber grab a chunk of market share from Didi.

In addition to Uber selling its Chinese subsidiary, the deal also involves Didi making a $1 billion investment in Uber.

Last year, China’s ride-hailing leaders Didi and Kuaidi joined forces, creating a homegrown juggernaut. The merged company Didi Chuxing brought together is backed by the Alibaba Group Holding Ltd. and Tencent Holdings Ltd., the country’s most valuable internet businesses. Apple Inc. joined in this year with a $1 billion investment in Didi. The Chinese government passed a new rule last week that legalized ride-hailing services, paving the way for further expansion of these businesses.

“As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart,” Uber CEO Travis Kalanick was reported as saying in a yet-to-be-published blog post obtained by Bloomberg. “Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”

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