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Didi 99

3rd January, 2018

A year after buying a minority stake in Brazilian app 99 - owner of the second most used transportation application in the country, behind Uber -, the Chinese company Didi Chuxing, founded and run by businessman Cheng Wei, closed the acquisition of the Brazilian company at a valuation of R$3.25 billion (US$1 billion).

Cheng Wei, who founded Didi in 2012, after working for another Chinese giant, Alibaba, is a young 34-year-old businessman. Didi’s strategy is to invest not only in the online service of passenger transport, but also in car rental, delivery of food and in the development of electric cars both with and without a driver. Didi is at the head of the list of the most valuable startups in the world, having surpassed Uber, with a valuation of US$70 billion. Last week, Japanese group SoftBank bought 30% of Uber at a major discount, bringing down the value of Uber to US$48 billion.

In Brazil, the operation announced yesterday involved the purchase of shareholdings from Riverwood Capital, Monashees, Qualcomm Ventures, Tiger Global and SoftBank, in addition to the injection of more resources into 99, according to people who followed the negotiations. Founded five years ago, 99 was valued in this transaction at R$3.25 billion (US$1 billion), joining the global list of "unicorns". 99 declined to comment on the news.

In Brazil, Uber has about 60% of the market, twice the share of second placed 99. Spanish company Cabify, who merged with Brazil’s EasyTaxi in June, is in third place, according to market estimates. A year ago, Didi had participated in an investment round at 99 which also featured Riverwood and other funds. The announced investment of US$100 million did not immediately flow to 99’s accounts as much of it was conditional on meeting certain goals set out in the contract, according to Valor Economico. The situation was the same for another investment by SoftBank, announced in May, which was also worth US$100 million. The investments that 99 received were allocated to the expansion of the service to more Brazilian cities. In an interview with Valor in January last year, the co-founder and now member of the advisory council Paulo Veras, said that plans were also in place for Latin American countries, but no move in that direction has been made so far.

Last week, Reuters reported, citing people who did not want to identify themselves, that Didi plans to launch its application in Mexico in the first quarter. Brazil thus becomes an important part of China's strategy to compete in the Latin American market with Uber. Valor Econômico found that 99 investors were discussing a new injection of resources in the company and that Didi was interested in participating. "99 will grow even more and the longer Didi took to buy, the more expensive it would be," said a person close to the talks. During the past year, executives of the Chinese company have frequently visited the headquarters of 99 in the south of São Paulo. In June, the two companies signed a cooperation agreement whereby every technological part of the Brazilian application was migrated to platforms developed by the Chinese - today it is possible to take a taxi in Shanghai using the 99 app and pay in Brazilian reais.

The dispute with Uber began in Chinese territory in 2013 and culminated in the decision in 2016 of the US application to leave China after losing US$2 billion. Didi bought the Uber Chinese operation. The US application had a minority stake in Didi, with a right to a board seat, but without the right to vote. The Chinese company also had a seat on the board of Uber. Didi then started talking about its global aspirations, raising money from investors and partnering with other companies like Grab in Southeast Asia and 99. Didi said last week it had raised US$4 billion with a group of investors including Mubadala Capital and SoftBank to expand operations outside China and fund research in the area of artificial intelligence. With this, the Chinese company has already raised close to US$20 billion. The participation of Japanese group SoftBank in Didi and Uber has raised doubts about the future of the fight between these two applications. There are those who believe that with a common investor and the fact that they have cross-shareholdings - Uber has a share of Didi and vica-versa - they can divide the territories in which each one will act. In this possible "blending", Latin America could stay with Didi.

Source: Valor Econômico

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