SINGAPORE/SAN FRANCISCO (Reuters) - Ride-hailing firm Uber Technologies Inc [UBER.UL] has agreed to sell its Southeast Asian business to bigger regional rival Grab, the firms said on Monday, marking the U.S. company’s second retreat from an Asian market.
The industry’s first big consolidation in Southeast Asia, home to about 640 million people, puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet Inc’s (GOOGL.O) Google and China’s Tencent Holdings Ltd (0700.HK).
A shake-up in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based SoftBank Group Corp’s (9984.T) Vision Fund made a multi-billion dollar investment in Uber.
“It was really a very independent decision by both companies,” Grab President Ming Maa told Reuters, adding that SoftBank CEO Masayoshi Son was “highly supportive”.
Uber will take a 27.5 percent stake in Singapore-based Grab and Uber CEO Dara Khosrowshahi will join Grab’s board. Grab was last valued at an estimated $6 billion.
“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said in a statement.
The Competition Commission of Singapore (CCS) said it has the mandate to review whether any mergers will result in a “substantial lessening of competition” and to take action, but it has yet to receive a notification from the companies.
“For example, CCS can require the merger to be unwound or modified to prevent the substantial lessening of competition,” the agency said in a statement.
For Grab, the deal will help its meal-delivery service, which will now merge with Uber Eats, compete with Go-Jek, according to a person close to Grab.
Go-Jek is a dominant player in Indonesia, the region’s biggest economy, and has rapidly expanded beyond ride hailing to digital payments, food delivery, on-demand cleaning and massage.
“Go-Jek is such a different app, with different behaviours, it is something I can’t see Grab competing with well in Indonesia for a long time, like at least a year,” said Vinnie Lauria, partner at Southeast Asia’s Golden Gate Ventures.
Ride-hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.
Uber, which is preparing for a potential initial public offering in 2019, lost $4.5 billion last year and is facing fierce competition as well as a regulatory crackdown in Europe.
Uber invested $700 million in its Southeast Asia business, less than the $2 billion it burned through in China before ceding its operations there to Didi.
Uber anticipated making more deals with rivals, but said it had no plans to do another sale in which it consolidates its operations in exchange for a minority stake in a rival.
“It is fair to ask whether consolidation is now the strategy of the day, given this is the third deal of its kind ... The answer is no,” Khosrowshahi said in a note to