Uber plucks success from Russian game of chicken

Dmitriy Serebriakov  TASS

The San Francisco-based ride-hailing service will merge with Yandex in six countries: Russia, Azerbaijan, Belarus, Kazakhstan, Armenia, and Georgia.

Last August, Uber was forced to retreat from China after inking a deal with ride-sharing rival Didi Chuxing, while taking a 17.5% stake in the company. "It allowed us to gain loyalty of tens of millions of consumers, and we are happy to continue our work with Uber". The Uber and Yandex brands and rider apps will continue to operate for the "foreseeable future"; the driver apps will be integrated after the transaction closes.

Thursday's agreement follows the recent merger of rival Russian taxi players Fasten and Rutaxi, marking a rapid consolidation of the market.

Uber's own spin on the news is positive. "It's a good deal".

In the new joint company, Uber will hold a 36.6% share and Yandex will own 59.3%, while the remaining 4.1% is owned by the company's employees.

The deal received approval of the Boards of Directors of both Uber and Yandex and now only needs the same from regulating agencies. Now, just weeks after Kalanick stepped down from the company he co-founded amid a wide-ranging sexual harassment and workplace culture scandal, Uber is scaling back its global ambitions once again. Yandex will consolidate the new company's results in its financial statements.

Yandex estimates the combined company's share of the taxi sector in Russian Federation is only between about 5 to 6 percent. Otkritie estimated the combination could push the taxi business into profitability by 2018 or 2019. It is now worth around $8 billion based on a recent funding that valued Didi at $50 billion.

"Combining our business with Yandex will give us a very significant stake in a new company which will initially serve more than 35 million trips each month", Pierre-Dimitri Gore-Coty, head of Uber's business in Europe, the Middle East and Africa wrote in an email to employees Thursday. It is agreed upon that Uber will invest $225 million while Yandex will invest $100 million of its own money. This week, it told investors that losses continued to decline in the second quarter, a source familiar with the report said.

More than 35 million rides were performed in June between the two operations, collecting more than $130m in gross bookings.