Uber, SoftBank and Anthony Tan among big winners in Grab’s record-breaking SPAC deal

"We're actually stronger now than before" the pandemic, Grab co-founder and CEO Anthony Tan, pictured here in 2019, told Nikkei on April 13. (Photo by Kosaku Mimura)

The Grab-Altimeter Growth merger seems to have struck a winning deal on all sides. The powerhouse combo, which announced its merger plans on Tuesday, values the post-merger entity at a stunning $39.55 billion, making it the world’s largest SPAC deal to date.

Here are some key takeaways from the mega-deal.

Uber scores 8x return, SoftBank receives liquidity

Figures enclosed in Grab’s investor deck show that some key shareholders are set to score windfall returns.

Uber, in particular, is likely to walk away with a 14.3% stake in Grab valued at $5.7 billion after the transaction. The US ride-hailing giant struck a deal with Grab back in 2018, which saw Uber taking a 27.5% stake in Grab in exchange for exiting Southeast Asia. Uber had invested $700 million in Southeast Asia deal before the sale to Grab and has now earned a roughly 8x return on paper within three years.

SoftBank, on the other hand, receives much-needed liquidity for its Vision Fund portfolio. SoftBank Vision Fund will hold an 18.6% stake in Grab valued at $7.4 billion after the transaction. To date, SoftBank has ploughed some $3 billion into Grab, making this a roughly 2.5x return for the multi-billion dollar fund.

Source: Grab’s SEC filings.

Anthony Tan’s super-voting shares

Grab’s co-founder and chief executive Anthony Tan will walk away with a very sizeable portion of voting control, with shares amounting to 60.4% together with “all directors and executive officers as a group.” Tan’s iron grip over his voting rights is vaguely reminiscent of Mark Zuckerberg’s control over Facebook, in which he reportedly held some 75% of Class B stock, controlling 58% of the vote.

Jianggan Li, CEO and founder of Momentum Works, discounted the comparison, noting these are two completely different companies with different growth trajectories.

“Facebook is a mature company that has been in the public market for years and holds stable market share with its products. Grab is in a growth market with fierce competition. Companies at Grab’s stage would need more concentration of decision power compared to those at Facebook’s stage of development,” he shared.

A source close to the Grab-Altimeter deal shared that while Tan’s outsized voting control is likely to get a lot of eyeballs, he made several concessions as well, including having portions of his shares under a lengthy lock-up, which will prevent him from conducting an immediate liquidation of his shares.

Earlier, during failed negotiations for a merger with arch-foe Gojek, Tan reportedly asked that he be appointed the de facto “CEO for life” of the combined entity and sought sizable voting power in the company and veto rights over board decisions.

Grab’s tall valuation ask

But is Grab-Altimeter’s $40-billion valuation over-the-top? Some analysts say yes.

Shifara Samsudeen, an equity analyst at LightStream Research who publishes on SmartKarma, said in an investor note that while Grab sees an expanding topline but no profits, its proposed valuation seems “excessively ambitious.” Samsudeen pegged Grab at a valuation of an FY2EV/Adjusted Net Revenue of 12x.

“Companies like Meituan, Dada Nexus and Pinduoduo are currently trading at FY2EV/revenue multiples of 5.37x, 3.16x and 7.38x, respectively, while Alibaba Group and Tencent Holdings that operate across multiple businesses, including fintech, are currently trading at much lower multiples compared to Grab,” she wrote.

Quiddity Advisors co-founder David Blennerhassett, in a research note published on Smartkarma, noted that the Grab SPAC is priced roughly 2x Uber on a forward EV/revenue metric.

Source: David Blennerhassett, Quiddity Advisors

Grab, last valued at $16 billion by the private market, has more than doubled its valuation with the Altimeter deal. Industry experts flag that the Southeast Asian company is still isn’t profitable—it lost $800 million on an Ebitda basis last year—so it has its work cut out for itself in ensuring it can meet its financial targets to keep investors on the table.

“As a general rule, Grab has to be very, very confident that they can beat the earnings forecast that they’ve shown consistently over the next few quarters, so they can give investors the confidence that they haven’t bought something at the top of the market,” shared an experienced investment banker familiar with SPACs.

“If Grab has genuinely figured out how to make money and is not just going to be a cash vending machine, that’s great. But we don’t want to be putting Southeast Asia out there for the wrong reasons,” he cautioned.

For now at least, Grab’s upcoming public listing is a huge win for the company, its shareholders, but more importantly, Southeast Asia.

“Nobody in the US knew who Grab was or what they did just a few years ago. I think this has really woken the world up to what’s happening here,” said Frank Troise, managing director and CEO at SoHo Advisors. “It’s fantastic news for Grab, and even as a branding exercise, it’s great for all of Southeast Asia.”

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.