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Lyft Sells Level 5 Unit to Toyota Subsidiary for $550 Million

Sale of self-driving unit seen speeding EBITDA profitability at rideshare company.
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Lyft, Inc.  (LYFT) - Get Lyft, Inc. Class A Report said Monday after the bell it has agreed to sell its Level 5 self-driving vehicle division to a unit of Toyota Motor Corp. for $550 million.

The ridesharing company said the deal will accelerate its path to profitability, largely by reducing R&D spending.

Level 5 is being sold to Woven Planet Holdings, Inc., a subsidiary of Toyota. Lyft launched its Level 5 unit in 2017 to develop its own self-driving technology. The company said it will now focus on its open platform unit to integrate third-party self-driving technologies with its dispatching network.

"This partnership will help pull in our profitability timeline," Lyft Co-Founder and President John Zimmer said in a statement. "Assuming the transaction closes within the expected timeframe and the COVID recovery continues, we are confident that we can achieve Adjusted EBITDA profitability in the third quarter of this year."

The deal is expected to cut $100 million of Lyft’s non-GAAP operating expenses a year, “primarily from reduced R&D spend,” The statement said.

Lyft will receive $200 million up front, once the transaction closes in the third quarter, with payments of the remaining $350 million spread over five years, according to the statement.

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Woven Planet and Lyft have signed commercial agreements for the utilization of Lyft system and fleet data to accelerate the safety and commercialization of the automated-driving vehicles that Woven Planet will develop, according to the statement.

Shares of Lyft rose $1.15, or 1.8%, to $64.21 in after-hours trading. In Toyota ADRs  (TM) - Get Toyota Motor Corp. Report were little changed in after-hours action.

Lyft and rival Uber UBER have recently been seen as benefiting from economic reopenings as pandemic worries ease in the U.S. 

In December, Uber sold its self-driving division to Aurora.

Uber weathered the coronavirus in part because of its Uber Eats food delivery unit, which saw sales surge during lockdowns. 

Earlier this month TheStreet's Jim Cramer said he was bullish on Uber following its latest results.