In this Sunday, June 24, 2018 photo, Ammal Farahat, who has signed up to be a driver for Careem, a regional ride-hailing service that is a competitor to Uber, poses for a photograph next to her car on a street in Riyadh, Saudi Arabia.
Photo: Nariman El-Mofty (AP)

Finalizing a long-rumored deal, Uber announced on Tuesday that it would acquire its Dubai-based competitor Careem in a deal worth $3.1 billion. The acquisition arrives ahead of Uber’s initial public offering expected as soon as next month.

Uber said the acquisition would run it a cool $1.4 billion in cash, with another $1.7 billion promised in convertible notes. Uber said in an announcement that it expected the deal to officially close in the first quarter of 2020, subject to regulatory approvals in various markets. While a subsidiary of Uber, Careem will continue to function as an independent brand in its sizeable Middle East markets, which include Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates.

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The Financial Times, which reported the deal Sunday ahead of its official announcement this week, noted that the acquisition marks a significant historic milestone for the Middle Eastern tech industry. And with Careem positioned as the reigning king of ride-hailing in the region, CNN Business notes the acquisition marks the largest tech deal in the Middle East’s history.

“The mobility and broader internet opportunity in the region is massive and untapped, and has the potential to leapfrog our region into the digital future,” Careem CEO and co-founder Mudassir Sheikha said in a statement. “This is a milestone moment for us and the region, and will serve as a catalyst for the region’s technology ecosystem by increasing the availability of resources for budding entrepreneurs from local and global investors.”

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Careem and Uber will both continue to operate in the region. In an email to Uber staff on Tuesday, Uber CEO Dara Khosrowshahi said the decision to allow Careem to function as an independent subsidiary “has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each.”

While rumors of the deal have been floating around since last summer, the multi-billion dollar deal acquisition arrives as Uber is gearing up for its IPO. And amid Uber’s slowing revenue growth, Reuters noted that the acquisition will signal to possible investors that Uber is willing to fork over the cash to continue expanding.

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[Reuters]