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.
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.
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.”