The tie-up between Didi Chuxing and Uber China will create a combined company worth around $35bn and with nearly 100 per cent of China’s ride-hailing and ride-sharing market. Previously, Didi Chuxing had estimated that it held around 80 per cent of the national market, while Uber had guessed that its China arm covered around 30-35 per cent of the market. The union between Didi and Uber brings to an end a long-running subsidy war between the two companies that helped keep a lid on fares for passengers and delivered competitive pay rates for drivers. Though Uber China will continue to operate under its own separate brand after the tie-up, it’s likely that the end of competition between the two operators will herald higher fares and tighter wages going forward.
Newly legalised service
News of the merger between Didi and Uber comes less than a week after the Chinese government released new legislation legalising online ride-sharing services in the country. The new law, which comes into effect on 1 November, resolves the legal grey zone around the industry but also ushers out the subsidy-driven scramble for market share that has thus far characterised competition in the market. Before the deal, Uber had complained of the need to follow market leaders like Didi in offering hefty subsidies or risk being pushed out of the market entirely. Uber lost approximately $1bn in China last year, while Didi is managing to turn a profit in only half the cities where it operates.
Law firms advise
A team from Skadden Arps Slate Meagher & Flom led by Hong Kong capital markets partner Julie Gao and Will Cai advised Didi Chuxing in its bid for Uber China alongside a team from Chinese firm Fangda Partners, which headed PRC law advice for the merger. The same Skaddens team also advised Didi on its $6bn merger with competitor Kuaidi Dache in 2013. Meanwhile, Uber was advised by a team from Davis Polk led by Hong Kong corporate partner Miranda So, while Chinese firm Han Kun acted as Uber’s PRC adviser for the deal.
Sources: Quartz; The Lawyer; Law.com
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