What's going on?

Uber, the ride-hailing company, has agreed to sell its China division to its chief competitor in the country, Didi Chuxing – creating a combined entity valued at $35 billion. The move could be a sign that Uber is preparing to become a publicly traded company sooner than later…

What does this mean?

For the past few years, Uber and Didi have fought a hugely expensive battle for market share within China. Both companies boosted their growth with deals for drivers and passengers – which was a big barrier to them becoming profitable companies. While many are characterizing this deal as Uber �throwing in the towel,� it�s walking away with a 17.7% stake in Didi that�s worth (on paper, at least) more than $6 billion – which ain�t that bad!

Why should I care?

For stocks: Uber is probably getting ready for its initial public offering (IPO).
An IPO is when a company�s shares become available for anyone to buy (e.g. on a stock exchange). Various reports have said that Uber is aiming for an IPO in 2017. By selling its China operations, Uber is removing the big cash drain that competing with Didi has become, and that will likely make it more attractive to potential new investors. The stake in Didi could also be valuable to future shareholders: remember, most of Yahoo�s value is driven by the ownership stake it acquired in Alibaba many years ago.

The bigger picture: Uber is the exception that proves the rule: China is a tough market for international companies.
Uber gained a better foothold in China than virtually any other American tech firm (except Apple). But it�s still folding its China operations into a local competitor. The environment for western companies trying to do business in China has only become more difficult in recent years � and that doesn�t bode well for companies that are targeting China for much of their growth (e.g. Volkswagen, Starbucks and, even, Apple).