- Didi is teaming up with Softbank to shore up Grab’s finances
- Uber also sees Southeast Asia as a key ride-sharing market
China’s Didi Chuxing and SoftBank Group Corp. are backing a new round of funding in the Southeast Asian ride-sharing service Grab -- putting even more pressure on Uber Technologies Inc.
The round, which may close as early as next week, could exceed $600 million and push the total amount of funds available to Grab past $1 billion, according to people familiar with the deal. Didi is in discussions to invest no more than $100 million in the form of convertible debt, said one of the people, who declined to be identified because the deal is private. Grab is also seeking to raise a separate $400 million in the following weeks, one of the people said.
The fund raising round shows that the truce between Didi and Uber in China this week is far from a global accord. Didi bought out Uber’s operations in the country and became a shareholder in the U.S. company, but the Chinese firm’s investment in Grab shows it will continue to clash with Uber in Southeast Asia and perhaps other regions.
“Didi probably has a lot of reserves from what they thought might be a longer war in China,” said Adrian Li, managing partner at Convergence Ventures, a Jakarta-based firm that doesn’t have stakes in ride-hailing companies. “Now they will be able to put the reserves in new growth markets like Southeast Asia and back a player they believe has a strong chance.”
Grab and Didi declined to comment, while SoftBank didn’t respond to requests for comment.
Grab CEO Anthony Tan said he expected Uber to concentrate on the relatively untapped Southeast Asian market after agreeing to sell its China business. The U.S. company plans to redeploy 150 engineers from its Chinese operations to other key markets, including Grab’s backyard, people with direct knowledge of the plan have said.
Grab, which operates in 30 cities across six countries, was valued at $1.5 billion in December 2014, according to CB Insights. It’s not yet clear what the company’s valuation in the current round of fundraising will be.
“Southeast Asia as a market is very attractive because it’s one that has not seen as intense competition as we’ve seen already in China or India,” Li said.
On-demand car services have taken off around the world as smartphone usage expands and riders seek simpler or quicker alternatives to taxis and public transportation. But the process of signing up drivers and attracting customers is a costly one, requiring big subsidies on rides.
The alliance that Didi forged last year with Grab also included India’s Ola and the U.S.’s Lyft Inc. It’s unclear what impact the Didi-Uber deal will have on the other members of that tie-up.