Uber Merges Russian Operations With Yandex In Second Foreign Withdrawl

Shares of Russian search-engine leader Yandex (NASDAQ:YNDX) lifted off in a big way on Thursday, on news of an important deal with Uber Technologies.

The new company, called NewCo, will take control of both companies' services in Russia, Kazakhstan, Armenia, Azerbajdzjan and Georgia.

For now, the Uber and Yandex apps will continue to function under their own brand names, while the driver apps will be combined once the deal closes - probably in the fourth quarter of this year, if it's approved by regulators. Employees will own 4.1 percent of the company on a fully diluted basis.


Unlike that deal, however, Uber will remain an active participant in its new investment and its Russian users will continue to use the same app as the rest of the world. The company's CEO will be Tigran Khudaverdyan, who now runs Yandex's ride-hailing business.

The deal marks another retreat for the San Francisco, California-based company following its withdrawal from China in August past year, when it folded its Chinese interests in with indigenous rival Didi Chuxing. Uber will also contribute its UberEATS business in the region to the combined company.

The deal comes not long after Uber CEO Travis Kalanick, who helped found the app-based auto service in 2009, resigned amidst investor pressure.


This deal, which will need regulatory approvals, will value the combined entity at over $3.4 billion. "Together, their businesses handle 35 million rides a month". Uber had been bleeding money in China. The company also will stretch into Armenia and Georgia, where Uber does not now operate. Cameron Poetzscher, Uber's vice president of corporate development, and Fraser Robinson, the head of business in the region, also played major roles in negotiating the deal with Yandex. Uber lost more than $2 million while fighting Didi in China. The drivers are to unite on a common platform, which will help increase the number of available vehicles and reduce waiting time.

Given changes in the business at home - namely CEO Travis Kalanick resigning amid a host of scandals involving sexual harassment and other bad management practices - the company appears to be having a wider thinking of its overall strategy. The two companies will integrate the apps for drivers.



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