In June 2018, Infrastructure Ideas surveyed the mobility revolution in transport. It was clear that capital was soon going to be flowing here in amounts rivaling traditional transport sectors such as ports, airports and railways. And while 95% of the capital to date in these sectors was being deployed in OECD countries, we predicted that soon, as in most areas of infrastructure, the majority of new capital would be seeking out higher growth opportunities in Emerging Markets. It didn’t take long to check that prediction.
Last week, Uber announced that it would acquire the Middle East’s largest ride-sharing service, Careem, for over $3 billion.
This will be one of the largest private infrastructure transactions to date in the Middle East. And for a company that is barely six years old. Careem, based in Dubai and operating across fifteen countries in the Middle East and surrounding areas, was founded in 2012. Ride-sharing was not even its initial business, as it was founded as a corporate car service, before following consumer demand into ride-sharing and delivery services similar to Uber Eats. Large markets served by Careem include Pakistan and Turkey.
For Uber, this is not only big money, but a departure from how it has addressed its Emerging Market competition to date. In China, in Indonesia, and in Russia, Uber has previously chosen to sell its in-country operations to local rivals, preferring to raise cash to cover losses, rather than maintaining loss-making operations in more countries. The Careem acquisition signals that as it edges closer to breaking even and to profitability, Uber may now be more willing to pay for control of Emerging Market rivals. Uber is initially signaling that Uber and Careem services will run in parallel in the dozen or so countries where the two both operate. CEO Mudassir Sheikha will continue to run Careem, according to Uber’s announcement. China’s Didi Chuxing, the biggest ride-sharing company in China, has been one of Careem’s largest investors. Careem’s previous fund-raisings had generated some $800 million, and analysts place Uber’s acquisition price at about a 50% premium to previous valuations.
The announcement follows by days the IPO by Lyft, which valued Lyft at $22 billion. Uber’s preparations for an IPO have been widely covered, with an expected valuation of around $120 billion.
This is another sign of how technology, after revolutionizing the energy business, is having a larger and larger effect on other parts of the infrastructure world. As we’ve previously written, for investors, staying locked into traditional segments and failing to understanding the impacts of technology will carry a high cost in missed opportunities.