Ride-hailing service Uber said it has acquired its Middle East competitor Careem for 3.1 billion US dollars (£2.3 billion), making it the largest-ever technology purchase in the region.

Uber said the deal consists of 1.7 billion dollars (£1.2 billion) in convertible notes and 1.4 billion dollars (£1 billion) in cash.

The deal will make Careem a wholly-owned subsidiary of Uber, operating as an independent company under the Careem brand and led by its original founders.

Uber app
Careem was Uber’s biggest competitor in the region (Matt Alexander/PA)

Dubai-based Careem is among the Middle East’s most successful start-ups. Careem is popular across the Middle East in part because it introduced the option for riders to pay by cash rather than just credit card.

Uber’s CEO Dara Khosrowshahi said in a statement the purchase expands the US-based company’s strength around the world.

Mr Khosrowshahi told staff 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.

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.

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.