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Inside Didi Kuaidi's headquarters in Beijing. (GeekWire Photo)
Inside Didi Kuaidi’s headquarters in Beijing. (GeekWire Photo)

Uber’s China business is merging with Didi Chuxing, the country’s top ride-hailing company, in a deal that will help Uber shed massive financial losses and value the combined entity at $35 billion.

Bloomberg first reported the deal late Sunday, and other outlets confirmed the merger, which gives Uber China a 20 percent stake of the combined company. Didi was previously valued at $28 billion.

Didi will also invest $1 billion in Uber at a $68 billion valuation as part of the deal.

It’s big news not only due to the huge valuation, but because Uber spent the past two years investing billions of dollars to battle Didi, which claimed to have 80 percent market share. Some say the deal will better position Uber for an IPO next year.

The timing is also notable, given that China approved new regulations last week that legalized ride-hailing services like Didi and Uber.

Inside Didi's headquarters in Beijing.
Inside Didi’s headquarters in Beijing.

Earlier this year, San Francisco-based Uber said it was losing $1 billion a year in China. Bloomberg reported today that Uber has lost more than $2 billion in the country.

“You’re not going to find a country with 80-plus cities over five million people anywhere else,” Uber CEO Travis Kalanick told The Wall Street Journal last year. “The vastness of the opportunities really isn’t matched in any other market.”

Didi said in May that it facilitates more than 11 million rides per day and has around 300 million users across 400 Chinese cities. It merged with former rival Kuaidi last year and raised $7 billion in June. The company counts Chinese tech giants like Alibaba and Tencent as investors; Apple also recently invested $1 billion in Didi.

GeekWire visited Didi Kuaidi’s headquarters in Bejing as part of our China trip this past November and met with Zhang Bo, founding CTO of Didi. Zhang told GeekWire that his company would outpace Uber for a rather simple reason: It knew the nuances of the Chinese market better than its foreign competitor.

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“Our technology is tailored to this particular market,” he said via an interpreter. “That gives us an advantage over our competitors.”

The fierce competition between Didi and Uber played out in public, with Tencent blocking Uber from its extremely popular messaging platform, WeChat, which customers can use to hail a Didi driver and pay for a ride.

The two companies also competed outside of China, too — for example, Didi partners with and is an investor in Uber rival Lyft. Didi is also an investor in other ride-hailing giants like Ola in India and Grab in Asia.

“Now, everyone owns everyone everywhere,” noted Recode editor Kara Swisher.

We’ve reached out to Uber and Didi and will update this story when we hear back.

Update: Didi issued a press release confirming the acquisition. Kalanick will join Didi’s board; Didi founder Cheng Wei will join Uber’s board.

“Didi Chuxing and Uber have learned a great deal from each other over the past two years,” Cheng said in a statement. “This agreement with Uber will set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level.”

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