Egypt’s competition regulator, the Egyptian Competition Authority (ECA) has approved Uber’s acquisition of regional rival Careem after Uber’s agreement to comply with a set of commitments proposed by the ECA that will protect the rights of riders, drivers, investors, and reduce harm to competitors.
The $3.1 billion acquisition was first announced in March and is expected to close in the first quarter of 2020, most likely in January. The acquisition, consisting of $1.7 billion in convertible notes and $1.4 billion in cash, is expected to be a record for a tech startup exit in the Middle East and one of the highest for ride-hailing mergers and acquisitions, globally.
“We welcome the decision by the Egyptian Competition Authority to approve Uber’s pending acquisition of Careem. Uber and Careem joining forces will deliver exceptional outcomes for riders, drivers, and cities across Egypt,” a spokesperson for Uber said.
Uber is acquiring all of Careem’s mobility, delivery, and payments businesses across the greater Middle East, which includes operations in Morocco, Pakistan, Egypt, Jordan, Saudi Arabia, and the United Arab Emirates. At the close of the merger, Careem will become a wholly-owned subsidiary of Uber but will preserve its brand and continue to operate independently with its co-founder and CEO Mudassir Sheikha at the helm.
Part of the commitment agreed upon by Uber and ECA is that Uber will abandon exclusivity provisions with partners and intermediaries and reduce barriers to entry into the market. The San Francisco-headquartered company is also obliged to comply with a cap placed by the ECA on passenger prices. Similarly, surge pricing is limited to 2.5 times the normal trip cost. Its occurrence is also capped and cannot exceed a threshold of 30 percent of annual trips, with the possibility of the ECA intervening.
Furthermore, Uber will not increase the commission they deduct from trips beyond the current rate. Also, the entry of new competitors is encouraged by allowing them to access Uber’s mapping and trip data, as well as allowing them to obtain user data from Uber and Careem applications (after obtaining user consent).
These commitments will be monitored by an independent monitoring trustee nominated by Uber and approved by the ECA to ensure adherence. The commitments will last five years from the date the transaction closes, or until when one or more ride-hailing providers achieve a 20 percent of weekly rides individually or 30 percent collectively in overlapping areas excluding Cairo and Alexandria.
This acquisition brings together Uber’s global leadership and technical expertise with Careem’s regional technology infrastructure. The deal will help Uber expand its platform strength globally and accelerate Careem’s purpose of simplifying and improving the lives of people. The latter has played a key role in shaping the future of urban mobility across the Middle East with its ability to develop innovative local solutions.
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