Marking the exit of Middle East’s first unicorn, Careem has now been acquired by its international competitor, Uber, for reportedly $3.1 billion. The announcement came through a statement released by the companies on Tuesday, 25th March 2018, becoming the largest deal to ever take place in the MENA region. The acquisition is now pending regulatory approval, which is expected to conclude in Q1 2020.
The acquisition took place after months of rumours surrounding the potential takeover or merger, and just 5 months after Careem’s last fundraise of $200M in October 2018. As part of that largest funding round of 2018, Careem reached a valuation of $2 billion, which means that in less than half a year, the company’s valuation shot up by a little more than 50%.
The Dubai-based ride-hailing service, founded in June 2012 by two ex-McKinsey & Company consultants, had raised a total of $771.7 million before its acquisition by Uber. The unicorn’s success was fueled by the investments from some of the most prominent investors in the region, including Kingdom Holding, BECO Capital, STC Ventures and STV. Not only that, the company also saw international interest for some of its six funding rounds, notably from Daimler (Germany), Didi Chuxing (China) and Rakuten (Japan).
The $3.1 billion deal recorded the highest exit amount to ever have been received by a regional startup and marks another high-profile exit in the region by an international acquirer. According to MAGNiTT, out of all the MENA startup exits, 43 have been by acquirers outside the MENA region, accounting for more than 40% of all deals. The acquisition also signals a robust international appetite for Middle Eastern startups, both from an investor and corporate perspective, due to the favourable population demographics and high potential returns. Some of the prominent acquisitions in the past include Souq.com by Amazon, Zawya by Thomson Reuters, Dubizzle by Naspers and Talabat by Rocket Internet. The acquisition of Souq.com by Amazon for $580 million, which was reportedly the highest at the time, is now second to Careem’s $3.1 billion exit.
The announcement comes as Uber is gearing up for its IPO, rumoured to be kickstarted as early as April this year, reportedly seeking a valuation of $120 billion. Although Uber is still running at a loss, its current focus is on gaining a larger global market share and diversifying its geographic footprint. Careem’s acquisition comes in line with just that, allowing Uber to gain a stronger foothold in the Middle East while also boosting the company’s growth figures that have been stagnating over the past months.
Careem announced that it will operate under its own brand as an Uber subsidiary, which will allow it to “build new products and try new ideas across not one, but two, strong brands” said Uber CEO Dara Khosrowshahi. The move also signal that the takeover may give other regional startups like Swvl and Halan stronger competition. However, similar to the story of Careem, which flourished in the face of international competition, these local companies may find a way to outperform their international rivals, and be among the next success stories that come out of the Middle East.