Five things you need to know about the Uber Didi Chuxing deal

 
Lynsey Barber
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Peace in our time: Uber and Didi will work together in China (Source: Getty)

Uber and Didi have thrown in the towel on their costly rivalry with a deal to merge in China, worth a reported $35bn.

Here's what you need to know.

1. Profits matter

Uber was burning more than $1bn a year on its Chinese operations, becoming its largest market, but not making any profit from it. That's what boss Travis Kalanick said earlier this year, indicating the fierce battle with local rival and market leader Didi Chuxing.

Now, the winner takes all battle is ending as Kalanick admitted in a leaked blog post that the goal is profitability - something investors have likely been waiting to hear, even for a yet-to-IPO startup (it is valued at billions, after all).

2. Uber and Didi share investors

Some savvy investors made bets on both sides in the race for China domination - Hillhouse Capital, BlackRock, Tiger Global and China Life

Beijing-based Hillhouse and New York's Tiger Global backed Didi first and Uber later, while asset manager BlackRock and insurer China Life backed Uber and then Didi.

Read more: Uber to merge Chinese business with rival Didi Chuxing

How these particular investments are broken down between Uber's global operations and separate China business has not been disclosed. Investors in its China business stand to grab a share of Didi as part of the deal.

3. Apple now has a stake in Uber

A part of the deal, Didi will take a stake in Uber's main operations. That would give tech titan Apple a stake in Uber, although how significant that is considering the late stage of Apple's investment in Didi earlier this year, the sky-high valuations of both and the rather complicated nature of the deal, is unclear.

4. Collaborative Didi's the winner

Didi itself is the result of a merger last year between Kuaidi Dache, backed by Alibaba, and Didi Dache, backed by Tencent, and the combined company put to rest the homegrown rivalry between the two.

Didi formed a coalition with other Uber rivals last year - GrabTaxi, Lyft and Ola - in various countries, which at the time it said would form a service that covered 50 per cent of the world's population.

Read more: Uber Technologies has raised $1.15bn from a high-yield loan

Further consolidation might have seemed inevitable, although Kalanick has been extremely competitive in this particular race for the China market, making the deal some what of a surprise.

5. China matters

The sheer size of the country matters. There are more than 500m smartphone users in the country and Didi believes the market alone here will be worth $50bn by 2020.

Just days ago, regulators in China gave the go-ahead to ride-hailing apps, so expect things to step up a gear.

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