Uber to sell Chinese branch to rival

Ride-hailing service Uber said on Monday that its Chinese branch would merge with its primary local rival, effectively ending a war between the two services.

Uber CEO Travis Kalanick said that the merger of Uber China and Didi Chuxing would help both companies, which have struggled to turn a profit while sinking cash into attracting users to their services.

{mosads}“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there,” he said in a blog post. “Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”

According to Bloomberg, which first reported the deal on Sunday night, Uber will get a 20 percent stake in the combined entity, and Didi will invest in Uber.

The decision to sell Uber China to Didi is nonetheless something of a capitulation for Uber in its battle for dominance in China.

Bloomberg reported that Uber has lost more than $2 billion trying to compete in China, and investors have been pushing for the company to offload its Chinese business. The merger could set up Uber for a stronger initial public offering down the road.

The announcement of the merger comes after a week where China rolled out new rules legalizing ride-hailing services. Both Didi and Uber had cheered the rules, which were not as onerous as an earlier draft version.

Many American tech companies have struggled in China, in part because of disagreements with the government.