UBER is bound to sign the purchase of Careem Networks FZ, its competitor in Dubai, for a total consideration of $ 3.1 Bn ($ 1.4 Bn in cash and the remaining $ 1,700 in convertible notes). At least the fact is taken for sure by the private wealth management company Yokohama Daisan Management. The deal is expected to be signed before Uber’s IPO in the Nasdaq.
If you cannot overcome them, purchase them. This seems to be UBER’s motto, specially If one considers how the US multinational has been doing more or less the same in other regions such as South East Asia.
¿Will UBER merge with Careem in those markets where both brands compete?. This was the case after the US company acquired Grab some months ago. It remains to be seen if the american giant applies in Middle East the same medicin they provided for the SE Asian market, or else they keep Careem and UBER as separate brands after the purchase.
“Uber has had an extremely aggressive past of snapping up companies, it’s got a successful business model and it looks very clear that this new acquisition will increase its valuation figures before launching its much anticipated Initial Public Offering this year,” said George Chase, Head of Corporate Trading at Yokohama Daisan Management.
Meanwhile, Lyft, who competes against UBER in the US domestic market will launch its IPO under the LYFT ticker in the technology market of the New York Stock Exchange (NASDAQ) on March 28th at a starting price per share between $ 62 and $ 68.
Yokohama Daisan calculates that UBER could reach a total valuation of up to $ 120 Bn on its first trading day in NASDAQ.
Taking the lead in the Emirates and other muslim markets with a single purchase
Careem was established in Dubai in 2012 by Mudassir Sheikha and Magnus Olsson, both former McKinsey consultants who wanted to develop a local company with a unique regional vision.
Later, a third co-founder, Dr. Abdulla Elyas, joined the brand when Careem acquired Jeddah in 2014, the address coding service with headquarters in Enwani.
In 2015, the Dubaiti company acquired TAXIII, the car booking service based in Morocco, and more recently, in 2016, the Pakistani start-up called Savaree.
Today Careem and its subsidiaries operate in 15 countries, Morocco, Oman, Pakistan, Palestine, Qatar, Turkey, UAE, Bahrain, Egypt, Iraq, Jordan, KSA, Kuwait, Saudi Arabia and Lebanon. The acquisition of the Dubai based company will clearly accelerates the expansion of UBER’s business in the Middle East, either under the UBER heading or under other brands.
Leaving aside Abu Dhabi and Dubai UBER and Careem compete in several markets located within the region, such as Saudi Arabia, Lebanon, Jordan, Pakistan, Qatar or Bahrain.
Despite the efforts of the American multinational, and its recent agreement with the airline brand Emirates, UBER has not been able to unseat Careem, the local competitor, since 2013, the year in which the American company launched in Dubai.
More adapted to the needs and consumer preferences in the Emirates than the western multinational, Careem clients do not need a credit card to register or pay for a service. Careem communicates with its customers through human teleoperators instead of bots or email, and it is somewhat cheaper as well. Being a local startup and pioneering UBER like services in its domestic market, Careem enjoys a better relationship with the Authorities and investors from Dubai.
In fact last December the Transport Authority of Dubai (RTA) and Careem announced a joint venture that will apply the tech layer to the taxi service in Dubai (mobile booking and, route tacking, as well as new payment systems).
Despite the eager competition UBER reacts against the eager competition by Careem through new services and better tech. The US company recently launched UberONE and its improved app UBER Lite, which allowsusers with low quality Internet connection book a ride with UBER. The multinational announced that it would launch UBER Lite soon in other markets, including Europe.
In addition, the American company returned to Abu Dhabi in November last year after leaving this market two years ago.
The acquisition of Careem by UBER could be beneficial for the business of both brands, although this deal is also considered as a sort of risk, even an actual danger for the tech entreprenneurial ecosystem and the free development of the domestic collaborative economy within the UAE.
Image above the headline.- Magnus Olsson, Dr. Abdulla Elyas and Mudassir Sheikha (founders of Careem). © Careem
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