Uber may carve-out Careem

Uber may carve-out Careem
Careem may be carved out of Uber

A deal is in the works between Uber and Careem to bring outside investors into the company. In corporate speak, this is known as a carve-out.

Carve-out occurs when a parent company sells a minority stake in a subsidiary. As opposed to selling the subsidiary outright, carve-outs involve selling equity stakes or giving up business control.

The Original Deal: Uber acquired Careem for $3.1 billion in March 2019. Before the acquisition, Careem was valued at $2 billion and had raised $1 billion in funding.

A clear win for investors and employees. And the deal’s terms were Careem-friendly and straightforward.

Careem would remain a separate entity and operate under its brand.

Soon after, Careem went full speed ahead and started to work on a super app for the region. One app lets you order food, make digital payments, pay for courier deliveries, and reserve rides.

Trouble in paradise: While Careem operates independently, Uber influences the strategic objectives pursued by its wholly-owned subsidiary.

Uber’s strategy in the region revolves around ridesharing. And Careem is working to take its super app, launched last year, to the next level.

But the pandemic has affected Careem’s core operations. Rides are expensive. And there’s a shortage of both riders and drivers.

This hurts the bottom line.

Uber thinks that it’s high time someone else stepped up to fund Careem to achieve its ambitious goals.

Meanwhile, Zeeshan Hasib Baig, Careem’s General Manager, is resigning to pursue other interests and will be replaced by Ibrahim Manna, the company’s managing director for international markets.

Zeeshan Baig isn’t the only one leaving. Other key executives have also left to start their own companies after the Uber acquisition.

Moreover, the Russian ride-hailing company, inDriver, is giving competition to Careem and has recently started dominating the market as it charges zero commissions to its drivers.

Big Picture: The region needs a super-app. But to build it will take a lot more than Uber has an appetite. The carve-out will provide Careem with the cash necessary to pursue its super app reality.

Related Posts