Uber and Didi Chuxing are bringing a two-year ride-sharing market war in China to an end with a merger worth billions of dollars.
In a blog post on the Uber website, the CEO and co-founder of Uber Travis Kalanick said neither company could survive if they continue to fight.
“I’ve learned that being successful is about listening to your head as well as following your heart,” Kalanick says.
As part of the deal, Didi has said it will acquire Uber’s brand, business and data in China in return for a 20% stake in the merged entity.
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According to Reuters, it will be worth about $US35 billion ($AUD46.5 billion) with Didi’s current valuation at $US28 billion ($AUD37.2 billion).
Didi will also invest $US1 billion ($AUD1.3 billion) into Uber Technologies.
Over the past two years, Kalanick says their battle to dominate the market has left both Uber and Didi struggling to succeed.
During this time, Uber has lost $US2 billion ($AUD2.6 billion) in China raising qualms with its investors.
“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there,” Kalanick says.
“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.”
Until now, Didi has been actively merging and acquiring other ride-sharing services to amp up its market power against Uber.
Didi is backed by Chinese tech conglomerates like Alibaba Group.
“China is an amazing country and if you aspire to make “transportation as reliable as running water, everywhere for everyone” you can’t ignore a fifth of the world’s population,” says Kalanaick.
“As an entrepreneur, if you have the opportunity to build both Amazon and Alibaba at the same time, you’d be crazy not to try.”
The companies are now working to combine boards and move forward.
“Didi Chuxing and Uber have learned a great deal from each other over the past two years,” said Didi founder Cheng Wei.
“This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.”