Uber forms a new company with its top competitor in Russian Federation

Uber merges its eastern European arm with Russian rival Yandex

Ride-hailing company Uber is scaling back in Russian Federation by spinning off its operations in the country to form a new company majority-owned by local rival Yandex. Yandex will invest $100 million into the company for a 59.3 percent stake, while Uber is to hold 36.6 percent and invest $225 million. The remaining 4.1% will go to employees.

Yandex and ride-hailing giant Uber announced that they had agreed to combine their regional ride-hailing businesses into a new company that Yandex will control. Tigran Khudaverdyan, head of Yandex.Taxi in Russian Federation, will become CEO of the combined enterprise, Uber and Yandex said.

In 2016, Uber realized that it was outmatched by its rival in China, where it spent billions in rider subsidies trying to gain its foothold against rival Didi Chuxing.

Gore-Coty called the deal "a testament to our exceptional growth in the region", and he said that "all full time Uber employees in the countries involved will be part of the new company", which suggests that no one will be laid off as part of the new venture. The deal applies to Uber's ride-hailing business, UberEATS, and Uber's logistics service. "It allowed us to gain loyalty of tens of millions of consumers, and we are happy to continue our work with Uber".

This deal, which will need regulatory approvals, will value the combined entity at over $3.4 billion.

The two companies' market share combined, however, make the prospects for Uber much brighter since it won't have to pour any more money into the region after this deal closes.

The new company will cover 127 cities of 6 countries and carry out 35 million transfers monthly. Apps from both ride-hailing companies will continue to be offered, while the driver app will become a single platform. Uber does not now operate in Armenia or Georgia. According to Uber, the new partnership will allow it to operate in 167 cities while service roughly 35 million trips each month.

Given changes in the business at home - namely CEO Travis Kalanick resigning amid a host of scandals involving sexual harassment and other bad management practices - the company appears to be having a wider thinking of its overall strategy. Driver apps will be integrated after the transaction closes.

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