Uber and Ola rev up interest in pursuing Addison Lee deal

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Uber and Ola rev up interest in pursuing Addison Lee deal

August 26, 2021 Cab4Now News 0

Uber Technologies and Ola, the Indian ride-hailing app, have expressed an interest in acquiring Addison Lee Group, potentially opening a new competitive front in one of the world’s largest private taxi-hire markets.

Cab4Now.com has learnt that both Uber and Ola are among “a handful” of parties in discussions with Addison Lee’s owner, the buyout firm Carlyle, about a possible takeover.

The two prospective bidders’ interest in the London-based minicab operator is at an early stage and may not lead to any formal offer from either of them for Addison Lee, sources said on Wednesday.

In Uber’s case, it has signed a non-disclosure agreement with Carlyle and met members of Addison Lee’s management team in recent weeks.

A source close to the recently New York-listed gig economy giant acknowledged that it was tentatively involved in the Addison Lee auction but insisted that it was unlikely to lodge a formal bid.

At least two other parties are said to be in discussions with Carlyle, one of which is understood to be a private equity firm.

No firm timetable has been set by Carlyle for a sale of Addison Lee to be completed, although it would prefer to do so before a refinancing of part of its debt is due to take place in the summer of next year.

For both Uber and Ola, a takeover of Addison Lee would provide a slingshot to its share of a lucrative and growing private-hire market.

Addison Lee, which has been owned by Carlyle since 2013, has found itself buffeted by ride-hailing apps’ arrival in the capital, and has lobbied vigorously against the licensing by Transport for London of rivals such as Uber.

Run by Andy Boland, its chief executive, Addison Lee has a fleet of about 5,000 cars in London and holds a roughly 10% share of the market, behind traditional black cabs and Uber.

The auction of the minicab operator comes as Uber seeks an extension of its licence to operate in London following a temporary permit granted last year.

That 15-month licence was awarded after Uber had promised to make radical changes to its operations and governance in the wake of a ban imposed by Transport for London (TfL) for a string of violations.

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Uber’s chief executive, Dara Khosrowshahi, came to London several times to argue the ride-hailing app’s case with officials.

A failure to secure an extension to one of its most important licences outside the US would have been disastrous for the company in the lead-up to this year’s initial public offering.

Uber’s New York Stock Exchange-listed shares closed on Tuesday at $43.36, marginally below the $45 at which they were priced in May’s flotation.

Its preliminary interest in Addison Lee is surprising because of the disparities in the business models operated by the two companies.

Uber’s drivers are effectively self-employed and use their own vehicles, while Addison Lee either owns or leases its cars to drivers.

In its results for the year to August 2018, Addison Lee posted a 13% increase in revenues but recorded pre-tax losses of almost £39m, up from £20.8m a year earlier.

“In the last three years, in an incredibly competitive market, Addison Lee Group has grown revenues by 47%, driven by international expansion, and a focus on service supported by technology and efficiencies from investment in infrastructure, all while maintaining core profitability,” Mr Boland said when its results were published in May.

“Our focus is on capturing a greater share of the $30bn annual global premium car mobility market, while embracing new technology which allows us to better serve our customers and cement our place as a key player in the mobility sector, as evidenced by our recent success in winning UK government funding for autonomous vehicle projects.”

‎The company has been competing aggressively with apps like Uber for years, and has made a series of acquisitions, including in the US, in an effort to recapture lost momentum.

However, Addison Lee has also found itself in the firing line in the debate about the gig economy, with a tribunal in 2017 ruling that its drivers were workers and therefore entitled to holiday pay and the national living wage.

For Ola, a bid for Addison Lee would transform its presence in London, where it gained its inaugural licence from TfL as recently as July.

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The India-based app plans to launch its service in the autumn.

The intensity of the battle for market share in the private-hire market is one of the factors weighing on the performance of many of the world’s largest car manufacturers amid doubts about the industry’s growth prospects.

The shift towards cleaner cars and autonomous vehicles is leading previously unconnected companies to co-operate on a series of major initiatives.

Addison Lee, for example, is working with partners including Ford in a consortium called MERGE, which is making the case to introduce autonomous vehicles to the Royal Borough of Greenwich.

Uber, Ola and Carlyle all declined to comment on Thursday.

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