DUBAI, United Arab Emirates — Ride-hailing service Uber announced on Tuesday it has acquired Mideast competitor Careem for $3.1 billion, giving the San Francisco-based firm the commanding edge in a region with a large young, tech-savvy population.
Uber said the $3.1 billion purchase consists of $1.7 billion in convertible notes and $1.4 billion in cash. It marks the largest technology transaction in the Middle East — outside of Israel — and propels the Dubai-based firm to legendary status among the region's budding tech startup scene.
Under the deal, Careem will keep its brand and app unchanged, at least for now. It will operate as a wholly owned subsidiary of Uber and be led by its original founders. The deal is expected to close in the first quarter of 2020 and is subject to regulatory approval in several countries.
"This is an important moment for Uber as we continue to expand the strength of our platform around the world," Uber's CEO Dara Khosrowshahi said in a statement.
In a memo to Uber's staff, Khosrowshahi said that keeping the Careem app for now allows Uber to try out new ideas across both brands. Over time, the firms will integrate part of their networks, he said.
Uber's stiffest competition in the Middle East was Careem, which launched in 2012 — three years before Uber entered the local market. Careem, founded by two former management consultants at McKinsey & Co., quickly became popular, particularly in countries such as Egypt and Pakistan, in part because it gave riders the option to pay by cash rather than just credit card.
Despite Uber's regional launch in 2015 and services such as Uber Eats, which delivers food, Careem had the lead operating in more than 100 cities across 15 countries.
Careem's CEO Mudassir Sheikha described the deal as a "milestone" for the company and for budding entrepreneurs in the region. As part of the deal, he will lead Careem's business under Uber and report to a board made up of three representatives from Uber and two from Careem.
"This has put our region on the map and has shown it's a great place to build some of the best technology in the world," Sheikha said in a statement to Careem customers.
Saudi Technology Ventures, one of Careem's investors, said the local ride-hailing firm succeeded by using its deep local knowledge and expertise to cater to the needs of the Middle East's young, techy-savvy population.
Other Careem investors include Kingdom Holding, chaired by Saudi Prince Alwaleed bin Talal, German car manufacturer Daimler AG, Japanese tech firm Rakuten and Mideast venture capital firm Wamda.