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US ride-hailing firm will take 27.5% stake in Asia-based Grab and its CEO will join Grab’s board.

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Ride-hailing firm Uber has agreed to sell its south-east Asian business to bigger regional rival Grab, marking the US company’s second retreat from an Asian market.

The deal is the industry’s first big consolidation in south-east Asia, home to about 640 million people, and puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet’s Google and China’s Tencent.

A shake-up in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based SoftBank’s Vision Fund made a multi-billion dollar investment in Uber. SoftBank also invested in Grab.

As part of the transaction, Uber will take a 27.5% stake in Singapore-based Grab and Uber’s CEO, Dara Khosrowshahi, will join Grab’s board.

“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said.

For Grab, the deal is a boon for its meal-delivery service, which will now merge with Uber Eats. A more robust food service will give Grab an advantage over Go-Jek, according to a person close to Grab.

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“It was really a very independent decision by both companies,” Grab’s president, Ming Maa, said, adding that SoftBank CEO Masayoshi Son was “highly supportive”.

In addition to its stakes in Uber and Grab, SoftBank is also one of the main investors in several other big ride-hailing firms including China’s Didi Chuxing and India’s Ola.

Ride-hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.

Uber, which is preparing for a potential initial public offering in 2019, lost $4.5bn last year and is facing fierce competition at home and in Asia, as well as a regulatory crackdown in Europe.

Uber invested $700m in its south-east Asia business, less than the $2bn it burned through in China before ceding its operations there to Didi.

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Uber anticipated making more deals with rivals, but said it had no plans for another sale in which it consolidates its operations in exchange for a minority stake in a rival.

“It is fair to ask whether consolidation is now the strategy of the day, given this is the third deal of its kind … The answer is no,” Khosrowshahi said in a note to employees.

“One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.”

A source familiar with Uber’s strategy said the company was going to step up its battle with Ola in India, another competitive and costly market where rivals have heavily subsidised rides in an effort to gain market share. Uber has close to 60% of the market there, by some estimates.

Uber’s two previous retreats, from China and Russia, happened under former CEO Travis Kalanick. The deal with Grab is the first operations sale by Khosrowshahi, who started in September.

Uber includes the US, Australia, New Zealand and Latin America among its core markets – regions where it has more than 50% market share and is profitable or sees a path to profitability.

Source: https://www.theguardian.com/technology/2018/mar/26/uber-to-sell-south-east-asia-business-to-competitor-grab