Uber announced that it has acquired its Middle East rival Careem for US$3.1bn (SAR11.63bn) on Tuesday. The transaction is expected to be concluded in Q1 20, subject to regulatory approval. Careem shareholders are expected to receive a mixture of cash and convertible bonds.
Three Saudi-listed companies own stakes in Careem: Altayyar, Kingdom Holding and STC, with estimated direct ownership of 30.5% (SAR3.55bn). Here, we analyse the impact of the acquisition on each company:
- Altayyar owns 14.7% of Careem and is the largest institutional shareholder. It started its investment in the company in 2014.
- The value of Altayyar’s stake is SAR1.73bn (SAR8.25/share). This represents 29% of its market cap.
- We expect the company to use the cash proceeds to finance expansions, mainly in the travel and hospitality sectors.
- Due to Careem’s losses, the book value of Altayyar’s investment in Careem declined to zero.
- After the Uber announcement, Altayyar’s stock price increased by 10%.
- STC bought 8.8% of Careem in January 2017 for SAR375mn.
- The value of STC’s stake is SAR1.03bn (SAR0.5/share). The company said that the financial impact will be announced once the deal is complete.
- Careem’s stake represents 0.47% of STC’s total market cap, which explains the limited impact on STC’s stock price in today’s trading session after the announcement (-0.4%).
- Kingdom Holding has a 7% stake in Careem, acquired in June 2017 for SAR232.5mn.
- The implied value of Kingdom’s stake is SAR1.25bn (SAR0.34/share).
- Careem’s stake represents 4% of Kingdom’s total market cap.
- After the Uber announcement, the Kingdom’s stock price increased marginally, by 0.6%.
We note here that Saudi’s Public Investment Fund (PIF) acquired a 5% stake in Uber in 2016 for US$3.5bn.
According to a statement from the two companies, Careem will continue to operate under its trademark brand. The acquisition comes amid reports of Uber’s highly-anticipated IPO next month with a valuation of cUS$100bn.
Will the Careem acquisition help Uber ahead of its IPO? Share your thoughts below.