Uber and Yandex to unite for Russian and other markets

Uber and Yandex to unite for Russian and other markets
July 13, 2017

Uber and Yandex signed an agreement to combine their businesses in Russia. Yandex has become a leading partner of the mentioned deal. It provides its participants with the extension to five correspondent markets.

After the agreement was made, Yandex shares rose by 17% during the Moscow afternoon trade on Thursday. The decision of two companies evidently followed the merger of another two taxi services, Fasten and Rutaxi, in May. The deal is treated by the analysts as successful since Yandex got rid of a rival and created a possibility for monetization and profitability growth in a long-term perspective.

According to the deal, San Francisco-located Uber is going to invest $225 million (13.5 billion rubles), and Yandex will provide a new joint company with $100 million investment and own at the end 59.3% of its shares. The companies informed that they are going to cooperate in Russia, Armenia, Azerbaijan, Belarus, Georgia, and Kazakhstan and make a new company with approximately 127 cities as a territory of operations. Yandex will have four board seats in the newly created company, while Uber will have only three.

Uber treated mentioned merger in Eastern Europe as a lucrative agreement and expressed confidence that the new deal would not influence the current strategy of company’s development. The stake of Uber in the joint company is 36.6%, while the value of this stake is $1.4 billion as it can be concluded from the agreed valuation of the whole company ($3.725 billion). The investment is a sizeable gain, and addition to the $170 million the company invested in entering the region 3.5 year ago.

Uber sold its business in China to the biggest local company Didi Chuxing a year ago, and received a 17.5% stake in the company. The rival was valued at $35 billion at the time of acquisition, and now the value of Uber’s part rose by $8 billion from the previously marked $6.1 billion. Didi’s overall value was set at approximately $50 billion.

In May, the company reported its net loss in the first quarter of the year, excluding employee stock options and other items. It narrowed to $708 million from $991 million of the previous quarter. Uber informed investors that the losses would fall during the second quarter of 2017.