Ride-hailing service Uber has acquired Middle East competitor Careem for $3.1bn, giving the San Francisco-based firm the commanding edge in a region with a large young, tech-savvy population.

Uber said the $3.1bn purchase consists of $1.7bn in convertible notes and $1.4bn in cash, when it made the announcement on Tuesday.

It marks the largest technology transaction in the Middle East – outside of Israel – and propels the Dubai-based firm to legendary status among the region's budding tech startup scene.

Under the deal, Careem will keep its brand and app unchanged, at least for now. It will operate as a wholly owned subsidiary of Uber and be led by its original founders.

The deal is expected to close in the first quarter of 2020 and is subject to regulatory approval in several countries.

Taxi drivers strike in Spain against ride-hailing companies like Uber Show all 10 1 /10 Taxi drivers strike in Spain against ride-hailing companies like Uber Taxi drivers strike in Spain against ride-hailing companies like Uber Demonstrators hold a huge banner reading 'Madrid's taxi demands that the law has to be enforced' as drivers protest outside IFEMA Convention and Congress Center, against the regulation of ride-hailing and car-sharing services such as Uber and Cabify EPA Taxi drivers strike in Spain against ride-hailing companies like Uber The taxi strike continues in the capital in a row after regional authorities rejected the sector's proposals to regulate VTC companies (VTC means 'transport vehicle with chauffeur), a day after a taxi driver was seriously injured when he allegedly threw himself in front of a VTC car in a picket set on a highway. FITUR is the most important fair running in Madrid EPA Taxi drivers strike in Spain against ride-hailing companies like Uber epa07310980 Several taxi drivers protest outside IFEMA Convention and Congress Center, where International Tourism Fair (FITUR) is to open later today, in Madrid, Spain, early 23 January 2019. The taxi strike continues in the capital for third day in a row after regional authorities rejected the sector's proposals to regulate VTC companies (VTC means 'transport vehicle with chauffeur), a day after a taxi driver was seriously injured when he allegedly threw himself in front of a VTC car in a picket set on a highway. FITUR is the most important fair running in Madrid. EPA/JAVIER LIZON JAVIER LIZON EPA Taxi drivers strike in Spain against ride-hailing companies like Uber epa07310979 Several taxi drivers protest outside IFEMA Convention and Congress Center, where International Tourism Fair (FITUR) is to open later today, in Madrid, Spain, 23 January 2019. The taxi strike continues in the capital for third day in a row after regional authorities rejected the sector's proposals to regulate VTC companies (VTC means 'transport vehicle with chauffeur), a day after a taxi driver was seriously injured when he allegedly threw himself in front of a VTC car in a picket set on a highway. FITUR is the most important fair running in Madrid. EPA/Javier Lizon Javier Lizon EPA Taxi drivers strike in Spain against ride-hailing companies like Uber Spanish National riot policemen stand guard EPA Taxi drivers strike in Spain against ride-hailing companies like Uber epa07310898 A taxi driver throws a tyre to a burning barricade during a protest held outside IFEMA Convention and Congress Center, where International Tourism Fair (FITUR) is to open later today, in Madrid, Spain, early 23 January 2019. The taxi strike continues in the capital for third day in a row after regional authorities rejected the sector's proposals to regulate VTC companies (VTC means 'transport vehicle with chauffeur), a day after a taxi driver was seriously injured when he allegedly threw himself in front of a VTC car in a picket set on a highway. FITUR is the most important fair running in Madrid. EPA/JAVIER LIZON JAVIER LIZON EPA Taxi drivers strike in Spain against ride-hailing companies like Uber epa07310899 Several demonstrators hold a huge banner reading 'Madrid's Taxi Demands That The Law Has To Be Enforced' as taxi drivers protest outside IFEMA Convention and Congress Center, where International Tourism Fair (FITUR) is to open later today, in Madrid, Spain, early 23 January 2019. The taxi strike continues in the capital for third day in a row after regional authorities rejected the sector's proposals to regulate VTC companies (VTC means 'transport vehicle with chauffeur), a day after a taxi driver was seriously injured when he allegedly threw himself in front of a VTC car in a picket set on a highway. FITUR is the most important fair running in Madrid. EPA/JAVIER LIZON JAVIER LIZON EPA Taxi drivers strike in Spain against ride-hailing companies like Uber Taxi drivers stand near garbage burning during a demonstration AFP/Getty Taxi drivers strike in Spain against ride-hailing companies like Uber Taxi drivers demonstrate outside the congress centre IFEMA on the first day of the International Tourism Fair (FITUR) in Madrid on January 23, 2019 to protest against regulations proposed by the authorities for VTCs (Tourism Vehicles with Chauffeur). (Photo by JAVIER SORIANO / AFP)JAVIER SORIANO/AFP/Getty Images JAVIER SORIANO AFP/Getty Taxi drivers strike in Spain against ride-hailing companies like Uber Taxi drivers stand next to a burning barricade during a strike Reuters

Uber's CEO Dara Khosrowshahi said in a statement: “This is an important moment for Uber as we continue to expand the strength of our platform around the world.”

In a memo to Uber's staff, Mr Khosrowshahi said that keeping the Careem app for now allows Uber to try out new ideas across both brands. Over time, the firms will integrate part of their networks, he said.

Uber's stiffest competition in the Middle East was Careem, which launched in 2012 – three years before Uber entered the local market.

Careem, founded by two former management consultants at McKinsey & Co, quickly became popular, particularly in countries like Egypt and Pakistan, in part because it gave riders the option to pay by cash rather than just credit card.

Despite Uber's regional launch in 2015 and services like Uber Eats that delivers food, Careem had the lead operating in more than 100 cities across 15 countries.

Careem's CEO Mudassir Sheikha described the deal as a “milestone” for the company and for budding entrepreneurs in the region. As part of the deal, he will lead Careem's business under Uber and report to a board made up of three representatives from Uber and two from Careem.

“This has put our region on the map and has shown it's a great place to build some of the best technology in the world,” Mr Sheikha said in a statement to Careem customers.

Saudi Technology Ventures, one of Careem's investors, said the local ride-hailing firm succeeded by using its deep local knowledge and expertise to cater to the needs of the Middle East's young, techy-savvy population.

Other Careem investors include Kingdom Holding, chaired by Saudi Prince Alwaleed bin Talal, German car manufacturer Daimler AG, Japanese tech firm Rakuten and Mideast venture capital firm Wamda.