Yandex Soars As Uber Cedes Control: Does Russia Win?

USA -based rideshare giant Uber will expand its business in Eastern Europe with Russian taxi service Yandex, the companies said Thursday. According to the deal, the companies will combine their businesses in Russia, Kazakhstan, Azerbaijan, Armenia, Belarus and Georgia. Yandex will invest a lot less than Uber, just $100 million, but it'll own 59.3% of the new venture that will be valued at $3.73 billion. Employees will own 4.1 percent of the company on a fully diluted basis.

Under the terms of the deal, Uber will invest 225 million United States dollars (£174 million) in the new unit and Yandex 100 million United States dollars (£77 million).

Last August, Uber announced plans to sell its business in China to rival ride-hailing service Didi Chuxing in a deal that values the merged Chinese company at $35 billion.

"This is an exciting opportunity in a unique situation and our operations in other countries will not be affected", Pierre-Dimitri Gore-Coty, head of Uber's business in Europe, the Middle East and Africa, wrote in an email to employees posted on the firm's website.

Uber is to merge its Russian and central Asia operations with rival Yandex in a move that signals another retreat for the ride hailing service. Along with its rides-on-demand business, the US firm is also merging its food ordering and delivery business, UberEATS, with the Russian firm. "It allowed us to gain loyalty of tens of millions of consumers, and we are happy to continue our work with Uber".

Yandex, which has been referred to as the "Google of Russian Federation", has an expensive mapping database and can market its services online with the new company. Together, they deliver about 35 million rides each month.

Narrowing its losses continues to be the focus for Uber, given its current focus on profitability and a path to an initial public offering, which major shareholders have become concerned with after the ousting of the company's CEO and co-founder Travis Kalanick.

"For example, a user of Yandex.Taxi could order an UberX directly from their Yandex.Taxi app upon arriving in London or Bangkok". But it offers one vision for how companies like Uber can escape the vicious cycle of competing to subsidize rides in a money-losing race to the bottom.

The difference between the Didi deal and the Yandex deal, however, is that there are no Uber properties that are continuing to operate in China.

The new company's goal will be to serve the needs of riders, drivers and cities as we develop a fast-growing, sustainable ridesharing, food delivery and logistics business in the region.

With the Yandex deal, Uber will also be appointing three board members for this new company. Driver apps will be integrated after the transaction closes.

  • Joey Payne