Rabat – Uber announced on Monday night that it will be paying $1.4 billion in cash and $1.7 billion in convertible notes for full ownership of Dubai-based ride-hailing company Careem. The tech deal is the largest of the kind in the Middle East, overpassing Amazon’s acquisition of Souq for $580 million in 2017.
The Careem brand will stay intact for now, and the cofounders of the company, Mudassir Sheikha, Magnus Olsson, and Abdulla Elyas are staying on with Careem, the companies said. However, the structure of Careem’s board will change. Three seats will go to Uber representatives and the remaining two to Careem.
Uber has previously operated in Morocco, launching in Casablanca in June 2015, but it halted operations just three years later due to local regulations. As Morocco only allows taxis to register as a legitimate service, Uber was operating in a legal gray area simply connecting independent drivers and passengers through its application.
In an official statement, Uber explained that their decision to stop operating was due to the lack of “clarity about integrating applications like Uber into the existing transport model.”
Uber also faced backlash from taxi drivers, who said the service was unfairly undercutting them. Tensions between taxi drivers and Uber drivers even escalated into violence, with numerous incidents being reported of intimidation, threats, car chases, and Uber vehicles being vandalized.
Uber said in its statement that “the current regulatory uncertainty does not allow us to provide a safe and reliable experience that meets the requirements of our customers, both drivers and passengers.”
Careem was founded in March 2012 in Dubai and currently serves over 100 cities in 14 countries in the Middle East, Southern Asia, and Africa, including Morocco. Even though Careem was in an identical position to Uber when it launched in Morocco, the company pushed through the criticism and gained popularity.
Careem estimated it had 300,000 users in Morocco in 2018, whereas Uber only had 19,000 users in Morocco at its peak before terminating its services.
Uber’s acquisition of Careem comes during a difficult time for the company. Uber booked a $1.8 billion loss in 2018, and exited China, Russia, and eight Southeast Asian countries, selling its business in the regions to homegrown startups similar to Careem.
The acquisition of Careem is pending regulatory approval and is expected to be implemented in the first quarter of 2020.