After months and months of rumors it’s finally been confirmed that ride-hailing giant Uber is picking up its Middle East rival Careem in an acquisition deal worth $3.1 billion — with $1.7BN to be paid in convertible notes and $1.4BN in cash.

Uber writes that it expects the transaction to close in Q1 2020, pending applicable regulatory approvals.

It says it will acquire all of Careem’s mobility, delivery, and payments businesses across the greater Middle East region, which it notes ranges from Morocco to Pakistan.

Major markets for Careem are stated to include Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates, with the business operating in 120 cities across 15 countries in total.

The startup has raised around $772M to date, according to Crunchbase, with investors including Saudi Arabia’s Kingdom Holdings, Chinese ride-hailing giant Didi Chuxing and Japanese tech giant Rakuten.

It was founded as a ride-hailing Uber rival in 2012 but has since diversified into offerings such as food and package deliver, bus services and credit transfers — bolstered via acquisitions of its own, such as RoundMenu and Commut (both announced last year).

The price-tag Uber is paying for Careem is notable for being considerably higher than recent reports of its valuation. Last fall, when Careem raised a $200M tranche of funding, the business was reported to be valued at around $2BN.

The value of the transaction also looks to be a record for a Middle Eastern tech startup exit, as well as being among the largest for a ride-hailing M&A globally. (China’s Didi shelled out $600M+ for Brazilian ride-hailing startup 99 at the start of last year, valuing that LatAm regional business at around $1BN, for example.)

It’s also notable for Uber aggressively stepping on the gas in a market, rather than making another strategic retreat, as it has in regions such as Southeast Asia.

Commenting on the Uber-Careem acquisition in a statement, Uber CEO Dara Khosrowshahi said:

This is an important moment for Uber as we continue to expand the strength of our platform around the world. With a proven ability to develop innovative local solutions, Careem has played a key role in shaping the future of urban mobility across the Middle East, becoming one of the most successful startups in the region. Working closely with Careem’s founders, I’m confident we will deliver exceptional outcomes for riders, drivers, and cities, in this fast-moving part of the world.

While Careem CEO and co-founder, Mudassir Sheikha had this to say in another supporting statement:

Joining forces with Uber will help us accelerate Careem’s purpose of simplifying and improving the lives of people, and building an awesome organisation that inspires. 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. We could not have found a better partner than Uber under Dara’s leadership to realise this opportunity. 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.

Upon closing, Careem will become a wholly-owned subsidiary of Uber — and will continue to operate under its own brand, with Sheikha leading the Careem business.

Under Uber’s ownership Careem will report to its own board made up of three representatives from Uber and two representatives from Careem, Uber added.

There is some overlap in regional market operation currently. So it remains to be seen whether both brands will continue to operate in cities such as Cairo or Casablanca indefinitely — or whether Careem might ultimately prevail as the selected brand for Middle Eastern and select Asian markets.

On this an Uber spokeswoman told us: “Nothing changes until the transaction is closed in Q1 2020 per regulatory approval. Following that, we will operate as two separate brands in all the markets we operate in.”

Initially it certainly sounds like there’s no plan to make major market changes, with Uber emphasizing that the pair will operate their respective regional services as well as independent brands. Though it’s possible that’s intended to try to reassure regulators that competition and innovation will not suffer from the merger. (Even if any branded difference will just be a mirage atop a merged business at the backend.)

Uber describes the acquisition as a marriage of its “global leadership and technical expertise with Careem’s regional technology infrastructure and proven ability to develop innovative local solutions”, suggesting the acquisition will support enable the pair to offer “diverse mobility, delivery and payment options”, while bolstering regional transportation infrastructure “at scale”.

“It will speed up the delivery of digital services to people in the region through the development of a consumer-facing super-app that offers services such as Careem’s digital payment platform (Careem Pay) and last-mile delivery (Careem Now),” it further suggests.

Uber also claims the acquisition will support an expansion in the “variety and reliability” of services offered, touting a “broader range of price points” for ride-hailing consumers, while claiming that those driving for the two brands should expect an increase in trip growth and “improved services” which it says will support better work opportunities and “higher and more predictable earnings” by making better use of drivers’ time on the road.

Albeit, it would say that wouldn’t it. And certainly it remains to be seen how consolidation of two regional ride-hailing rivals will have a positive impact on — for example — consumer prices for such services in the region.

In a memo to Uber staff, obtained by CNBC, Khosrowshahi couches the move as a “big leap” for Uber, pointing to strong growth in markets such as Pakistan and other recent developments such as Saudi Arabia opening up to women drivers as putting wind in ride-hailing’s regional sails.

What’s not mentioned in the memo is the tougher regulatory regime Uber’s business faces in Western markets where a series of legal challenges and critical scrutiny from policymakers has forced changes in how it operates that increase costs for the business — such as free insurance for drivers and delivery couriers which Uber expanded across Europe last year.

It’s also been moved to diversify from ride-hailing to planning for a multi-modal mix that includes micro-mobility services (acquiring e-bike startup Jump last year) as cities toughen policies towards congestion and pollution, and young urban consumers in temperate climates seek out hip alternatives to calling a car to get around.

By contrast the oil rich Middle East, with ‘lighter touch’ regulation and blistering temperatures which naturally favor air conditioned transportation, is arguably as close as it gets to perfect market conditions for ride-hailing generally, and therefore perhaps offers a more reliable demand base for Uber, a business that’s still got cars at its core.

On the structural decision to allow Careem to maintain an independent brand and operate separately, Khosrowshahi writes in the memo to staff that this was chosen after “careful consideration”.

“[W]e decided that this framework 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. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region,” he suggests, adding that he expects “very little” to change in either teams’ day-to-day operations post-close as both companies will “continue to largely operate separately after the acquisition”.

The decision to operate both brands was also the strategy used when China’s Didi Chuxing agreed to buy Uber’s China business, back in 2016.

Another element here is Uber’s long trailed IPO — which is reported to be finally, finally happening next month.

Bagging Careem now offers Uber some fuel for the growth story it will want to be able to pitch to potential shareholders ahead of going public — as a counter-narrative to offset the stiff losses its business continues to incur every quarter, even as it’s having to shell out $1.4BN in cash to bring Careem into the fold.

Most recently Uber reported $3BN in Q4 2018 revenues with net losses of $865M — the latter aided by a tax benefit that saved it from reporting a $1.2BN net loss in the period.

While on an annual basis, its revenues came in at $3BN for 2018 and losses totalled $1.8BN vs $2.2BN in 2017, so it’s shrinking the gap at least.