Uber, which has been spending hugely in China over the last two years, appears to have folded, striking a deal in which it will merge its Chinese operations with its main rival there, Didi Chuxing.
The news was first reported by Bloomberg tonight and Recode has also confirmed the transaction.
An Uber spokesperson declined to comment and a Didi one has not yet gotten back to me as yet.
Under terms of the deal, Uber China, the ride-hailing company’s Chinese subsidiary, will be part of a larger Didi company valued at $35 billion. Uber gets a 20 percent stake in that — Didi’s previous valuation was $28 billion.
That’s a $7 billion value for upward of $2 billion that Uber has frittered away, um, spent there. (Really, nice trade!)
In turn, Didi will invest in Uber at a valuation of almost $70 billion. That was about the value of Uber’s last round.
Now, everyone owns everyone everywhere.
Consider: Didi has investments from China bigwigs Alibaba and Tencent and also has a partnership with Uber’s U.S. rival Lyft, as well as with Grab in Southeast Asia, another Uber competitor. Apple recently made an investment in Didi and General Motors made one in Lyft. Uber’s investors are everyone, including China’s third powerhouse Baidu.
Confused? Let me break it down more simply: Uber knows when to fold them in China, after being engaged in an incredibly expensive ride war with Didi there. The pair have been taking shots at each other all along, claiming fraud and whatnot naughtiness, most of which I tried to ignore.
But Uber CEO Travis Kalanick admitted it was futile in a blog post obtained by Bloomberg and which is all over China’s WeChat service (you can see one such copy below).
Wrote Kalanick: “As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”
“It’s a win-win for both companies,” said one source.
Well, to be more precise, not a lose-lose anymore.
And let’s just point out, cutting the massive losses in China and turning it into a more solid investment certainly clears the way for an IPO that many expect Uber to have in 2017 or so.
More to come, I am sure, but for tonight, peace out.
This article originally appeared on Recode.net.