Uber to merge Russian business with Yandex

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Ride-hailing company Uber is scaling back in Russian Federation by spinning off its operations in the country to form a new company majority-owned by local rival Yandex. Uber and Yandex will be forming a standalone company in these regions, with Uber holding a 36.6 percent ownership stake that will be worth almost $1.4 billion. After these investments, and subject to certain adjustments at closing, the combined company will be owned approximately 59.3% by Yandex, 36.6% by Uber and 4.1% by employees of the company, on a fully diluted basis. Employees will own the rest. Both Uber and Yandex will invest hundreds of millions of dollars in the deal.

Yandex will be the leading partner, with Yandex Taxi Chief Executive Tigran Khudaverdyan becoming the combined company's CEO.

Emil Michael, Uber's former SVP of Business who left the company last month, was also involved in the deal.

On Thursday, ride-sharing giant Uber Technologies announced that it has agreed to merge its Russian Federation business with tech company Yandex NV (YNDX - Free Report), better known as the "Google of Russian Federation".

Yandex shares at Moscow Stock Exchange skyrocketed nearly 20 percent after the merger was announced.

The two companies' market share combined, however, make the prospects for Uber much brighter since it won't have to pour any more money into the region after this deal closes. Four members from Yandex will be on the board, with three seats for Uber.

Uber said it had invested $170m over three years in Russia, Azerbaijan, Belarus and Kazakhstan, establishing itself in 21 cities.

"There is ride-sharing and food delivery and beyond that there are also numerous opportunities in logistics that we will explore", Yandex Chief Financial Officer Greg Abovsky said on an investor call.

As part as the deal, Yandex signed a roaming agreement with Uber so users of its taxi app can hail Uber rides when traveling overseas, Yandex executives said. They were key deal-makers for Uber.

That Uber is putting more cash into the new company, yet is only gaining a little more than one-third of the ownership, indicates that Yandex holds a much larger share of the local market and Uber has effectively failed to overturn the incumbents. The drivers are to unite on a common platform, which will help increase the number of available vehicles and reduce waiting time.

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