Grab deal may be the last time Uber has taken minority stake in a company

The ride-hailing giant is seeking to calm frayed nerves of employees after its recent deal with Singapore's Grab

Uber top boss Dara Khosrowshahi has told his employees the company’s deal with Singapore-based ride-hailing firm Grab is the last time it has a minority stake after the merger anywhere in the world.

He indicated that in case a merger with Indian rival Ola happens, Uber will be the majority partner, according to sources close to the US-based company. 

Quelling fears of a takeover by Ola, which is also funded by Uber’s major investor SoftBank Group, Khosrowshahi made it clear the company was not ceding its position in India, one of its core markets.

The company is understood to have no intention of doing any more deals where it does not remain the controlling shareholder of the combined company, according to sources in the know. This could be its last minority deal, and it might not take a minority stake in any future merger with global competitors. Its strong positions in its core markets would be kept in mind, company sources added. 

Khosrowshahi said in his email to employees: "This transaction now puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don’t."

Grab would acquire Uber’s all operations in the Southeast Asian region, including food delivery service UberEats. The US-based cab aggregating giant will hold a minority stake of 27.5 per cent in Grab, and its chief executive officer (CEO) will join the board of the Singapore-based company. “The company (Uber) invested $700 million in the Southeast Asia region and is getting a 27.5 per cent stake, already valued at several billion dollars, with more growth to come. In the deal with Didi Chuxing too, its stake was initially valued at around $6 billion. Just a year later, it is valued at more than $8 billion as Didi’s valuation increased,” a source said.

The deal has also helped improve the company’s financials as it has narrowed its losses again in the fourth quarter of 2017 as revenues grew significantly. 

“This will allow them to double down in its core markets where it leads and continue to invest in product and tech as well as growth areas like Uber Eats,” the source said.

Uber now plans to free up capital to execute its growth plans in core markets — North America, Latin America, India, Europe, Middle East, Africa and Asia ex China and Southeast Asia — and invest in engineering and development of products such as Express Pool.

When reached out for comment on more consolidation after China, Russia and southeast Asia, a Uber spokesperson said, “No, we are focused on our product and technology. We want to grow by being the best choice for our customers around the world, not through transactions. But while M&A is not our top priority, it is our duty to be open to opportunities like this when they make sense given local conditions.”

During his visit to India last month, Khosrowshahi put all speculation to rest around SoftBank’s director Rajeev Mishra’s comment that Uber should concentrate on markets such as US and Europe for profitability.

“SoftBank is a respected investor and they may have an opinion, but that is not the only opinion in the room. The decisions we make and the strategy we undertake are driven by me with the board,” Khosrowshahi had said.