Regulatory filings by US based Uber show that the ride-hailing major Uber sold its India food delivery business Uber Eats to Zomato for $206 Million in return for a 9.99% stake. This deal was done at a lower valuation since Uber Eats did not get any rights that a primary investor would have gotten, for instance liquidation preference, right to information, etc. This was declared by a Zomato spokeperson to media.
This all stock deal was first announced on January 22, 2020 for which Uber said in its filing that the estimated fair value of the consideration received was $206 million, which included the investment valued at $171 million and $35 million of reimbursement of GST receivable from Zomato. According to Zomato, the discrepancy in valuation was because Uber did not receive the same rights as that of private investor.
Zomato's valuation, which stood at over $3Billion in January, seems to have been discounted during its buyout of Uber Eats India.
In consideration for the purchase of shares of Uber Eats, Zomato has paid through the issuance of Compulsory Convertible Cumulative Preference Shares in itself to Uber, which is allowed under Indian laws. This way Uber has effectively made an investment in Zomato - Dipti Lavya Swain, M&A Lawyer and Partner, HSA Advocates
Uber is contractually restricted from competing with Zomato in India with respect to meal delivery through January 2023.
Source Courtesy: Economic Times