Uber is selling off its unprofitable operations in China so it can focus on other markets, according to a report from Bloomberg. The move takes pressure off the ride-sharing company to operate in a fiercely competitive market, and it paves the way for a future initial public offering.
Didi Chuxing, a rival ride-sharing company, has agreed to buy Uber China in a merger deal. The deal gives Didi control over Uber’s brand, business, and data in the country. As part of the agreement, Didi will reportedly invest $1 billion in Uber’s global operations. Meanwhile, Uber Technologies and Uber China’s other stakeholders will receive a 20-percent share of the combined company formed from the merger.
Uber entered the Chinese market two years ago, and amid tight competition and heavy regulation, it has already lost $2 billion. Its biggest competitor was China-based Didi, which recently benefited from a $1 billion investment from Apple. Bloomberg, citing experts familiar with the matter, says Uber’s huge losses in China have prevented the company from moving forward with a potential IPO. Uber remains profitable in the U.S. and Canada, and can now focus on gaining similar success in India and Southeast Asia.
“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there,” Uber said in a blog post today. “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.”
The announcement comes just after China officially legalized ride-sharing services. The merger between Uber and Didi is still subject to government approval, but is estimated by insiders to be worth $35 billion.
This article originally appeared on MotorTrend.com