Singapore-based startup Grab is in talks to buy out Uber’s business in Southeast Asia, CNBC reported Friday, citing people familiar with the negotiations. The U.S. ride-hailing service provider would be compensated in the form of an equity payment granting it a “sizable” stake in Grab.
Uber sold its Chinese business to Didi in August 2016, which involved an equity deal. In that sense, Uber may be acknowledging where it’s getting beaten, and instead looking to pick up stakes in those companies as a hedge on its ability to expand globally. Should Didi — or Grab, in the case of this report — end up being bombshell successes, Uber would experience its own significant windfall and have some good news to report to its shareholders.
Last summer, the San Francisco-based firm opted for a similar transaction in Russia where it consolidated its operations with Yandex in exchange for over a third of the merged business.
As was the case with the previous two sales, Uber’s primary motivation for offloading its Southeast Asia unit would be cutting costs. The company burned through $4.5 billion in cash in 2017 alone and while its growth is still on track to eventually outpace its losses if it continues, it’s a major obstacle to its ambitions to go public next year.
The ride-hailing startup recently put an end to the largest threat to its public image in the form of the trade secret theft lawsuit filed by Alphabet’s Waymo and may become profitable by 2021, according to a previous statement from its CEO Dara Khosrowshahi.
Mr. Khosrowshahi recently indirectly dismissed the possibility of Uber exiting more developing countries by saying that continuing its investments in such markets is “the right thing to do.” He made his remarks at the Goldman Sachs Internet and Technology conference this week where indicated that, if it wanted to be, Uber could be profitable — though it is heavily investing in emerging markets and new technology like autonomous driving. That means assessing which markets would be loss leaders as it looks for growth versus some of its better-performing markets. Uber is all over the globe, but it faces stiff competition in Southeast Asia from Grab (and, formerly, Didi in China).