A ComfortDelgro taxi passes Uber and Grab offices in Singapore March 26, 2018. Source: Rauters/Edgar Su

Uber reaches truce with Grab in Southeast Asia merger

AFTER weeks of rumoring and speculation, US ride-hailing giant Uber Technologies Inc. has finally announced the sale of its Southeast Asian operations to regional rival Grab.

The firms confirmed the sale in a statement on Monday, marking the US company’s second retreat from an Asian market.

The sale includes all of Uber’s operations in Southeast Asia, as well as Uber, Eats in the region, according to Bloomberg. The deal provides the US company a 27.5 percent stake in the combined business, with Uber CEO Dara Khosrowshahi joining Grab’s board.

“This deal is a testament to Uber’s exceptional growth across Southeast Asia over the last five years,” Khosrowshahi said in a statement.

“It will help us double down on our plans for growth as we invest heavily in our products and technology to create the best customer experience on the planet.”

The merger marks the industry’s first big consolidation in Southeast Asia, home to about 640 million people, and puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet Inc’s Google and China’s Tencent Holdings Ltd .

Expectations of consolidation in Asia’s fiercely competitive ride-hailing industry were stoked earlier this year when Japan’s SoftBank Group Corp made a multi-billion dollar investment in Uber.

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

File: A heatmap showing the demand for Grab services in Southeast Asia is displayed during Grab’s fifth anniversary news conference in Singapore June 6, 2017. Source: Reuters

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

Grab has more than 81 million mobile app downloads, offering services in 178 cities across Singapore, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, Burma, and Cambodia. According to CB Insights, the Singapore-based company was recently valued at US$6 billion.

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

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

Grab said it will take over Uber’s operations and assets in eight countries in the region, and will expand its food delivery services.

Grab co-founder and CEO Anthony Tan was quoted as saying the truce would bring to an end the leadership battle in a Southeast Asian ride-hailing market expected to reach US$20.1 billion by 2025.

“Today’s acquisition marks the beginning of a new era. The combined business is the leader in platform and cost efficiency in the region.

Together with Uber, Tan said Grab is in a better position to fulfil it promise to outserve customers.

“Their trust in us as a transport brand allows us to look towards the next step as a company: improving people’s lives through food, payments and financial services.”

Additional reporting by Reuters