Grab-Gojek merger talks gain steam as key investors push for deal

Merger talks between Southeast Asian ride-hailing giants Grab and Gojek have gained steam over the past few months, with SoftBank and other investors from both sides pushing for a deal, multiple executives aware of the development told DealStreetAsia.

SoftBank is Singapore-based Grab’s biggest backer. It doesn’t own a stake in Jakarta-headquartered Gojek.

The Japanese behemoth is understood to have garnered the support of a slew of investors on the cap tables of both decacorns that command valuations of over $10 billion each.

The outcome, at this point, hinges on several factors, including a decision on who gets management control of what, fundraising plans in the works, and another potential consolidation in Indonesia, which is the largest market in Southeast Asia.

The transaction, if it fructifies, could bring about the most significant consolidation in the burgeoning ride-hailing market and see its largest tech unicorns combine their operations across the region.

The momentum in talks comes at a time when the COVID-19 crisis has had a severe impact on both Grab and Gojek‘s businesses. Even before the pandemic rocked the region, both rivals had been under tremendous pressure to assure investors that they can reach profitability.

Several executives who are privy to the ongoing negotiations between Grab and Gojek said both companies were still deadlocked over management and geographical control.

“If you ask me what’s holding up [the deal], to put it simply, it is ego. At the end of the day, it is about who is going to take on this primary role of running the business,” said a prominent Grab investor, on the condition of anonymity.

“Investors have every interest to drive a merger and to consolidate the play as long as regulation-wise, there is no hurdle,” the Grab investor added.

For the Masayoshi Son-led SoftBank Group, generating a positive outcome on Grab, which is among its prized investments, is critical, as its $100 billion Vision Fund has had to undertake massive writedowns in several other startups during the last 12 months, including WeWork and Uber Technologies.

SoftBank first invested in Grab in 2014 and has injected more than $3 billion in additional capital into the Singapore company, as the latter expanded its offerings beyond ride-hailing to include food delivery and financial services across the region.

Last month, SoftBank Group said it registered a net profit of $11.8 billion in the April-June quarter, helped by the fireside sale of its assets, as well as a recovery by the Vision Fund. In the quarter prior to that, the group had recorded an annual operating loss of $12.7 billion, its worst-ever performance, wiping out all gains the Vision Fund had made since its launch in 2017.

Deal dynamics

It is understood that investors driving the deal are pushing for the merger of Grab and Gojek across Southeast Asia – a proposition that Indonesia’s Gojek is happy to entertain. However, a core group of the current management at Grab, the larger valued company of the two, strongly opposes the idea and is interested in an Indonesia-only merger.



One of the compromises that had been brought forward by some investors, sources say, is merging Grab’s Indonesia operations with that of Gojek. In exchange, Gojek will exit other markets in the region.

In such a scenario, these investors are pitching for Gojek to get full control of the combined Indonesia operations, much like the way Uber relinquished its Southeast Asia business to Grab in exchange for a 27.5 per cent stake in the company in 2018.

But a section of Grab’s management, led by co-founder and chief executive Anthony Tan, is opposed to this proposal on two grounds, the executives quoted above said.

One, Grab wants a say in the management of the combined entity’s Indonesia operations. Second, it does not want to exit the fintech space in Southeast Asia’s largest market.

Two other sources suggested that Grab’s strong opposition against a region-wide merger is because it would take the personal shareholding of Tan in the combined entity to less than 1 per cent.

An executive aware of the thinking on Grab’s side asserted that it was not Tan’s ego that was stalling a potential deal.

“As a founder, and having built this company, [Tan] wants the best for Grab. He is putting Grab’s interest first,” the executive said. “While investors may have different versions of the deal, and even though several combinations may be discussed, Grab’s management has all along maintained they are only interested in an Indonesia deal.”

DealStreetAsia has been unable to ascertain Tan’s current shareholding in Grab. We were also unable to verify if a merger will see his stake fall below 1 per cent.

Industry watchers say a deal is more likely to happen with Grab president Ming Maa and Gojek co-CEO Andre Soelistyo at the helm of the two companies since they don’t carry the baggage of the famed rivalry between Tan and Gojek co-founder Nadiem Makarim.

While the final contours of the transactions are being worked out, the proposed deal is certain to draw the attention of antitrust authorities.

When contacted, both Grab and Gojek declined to comment on the development, terming them market rumours.

Jostling for a position of strength

Talks between $14 billion-valued Grab and $10 billion-valued Gojek first made headlines in February when US-based news portal The Information reported that the arch-rivals have had “serious” conversations about a potential merger.

The report further said that Grab president Maa and Gojek co-CEO Soelistyo had met earlier that month for the latest round of talks while adding that both sides were still a considerable distance from a potential deal.

According to The Information, Grab had told its major investors that Gojek wanted a 50-50 deal if a merger was to happen, while the former wanted a significant majority.

At the time, Grab had considerable bargaining power in the deal, given its superior size and presence in the region. It has operations in eight Southeast Asian countries, while Gojek operates in five (including the Philippines, where it only owns a controlling stake in fintech startup Coins.ph).

It is learnt that Gojek’s position got a boost after it raised $1.2 billion in fresh funding from undisclosed investors in March. The Indonesian company then raised another unspecified amount of funding from Facebook and PayPal. The latest capital injection brought its Series F round to over $3 billion.

According to a Gojek investor, the fresh round of capital enabled the Indonesian major to take a fresh stab at its international expansion.

In July, Gojek decided to unify its Vietnamese and Thai brands and bring them under one technology platform in an attempt to strengthen operations and brand image beyond its home market. Both Gojek’s 2018 Vietnam launch and its Thai launch in 2019 were under localised brand names – GoViet and Get, respectively – and used different apps.

Grab Financial in the market to raise $500m-1B

To re-strengthen its position in the ongoing negotiations, sources said that Grab is currently on the fundraising trail.

It is understood to be in advanced talks with investors to raise between $500 million and $1 billion for its financial services arm, Grab Financial. The company is set to announce new investors in Grab Financial over the next couple of weeks.

Grab got a leg-up in July when two of Indonesia’s top fintech startups, OVO and DANA, ironed out differences related to valuation and structure, thereby reaching an in-principle agreement to combine their operations. This would enable Grab-backed OVO and Ant Group-backed digital wallet provider DANA to take on market leader Gojek’s GoPay on its home turf in the payment market.

Last month, Bloomberg reported that Grab is in the process of raising $200 million from South Korean private equity firm Stic Investments Inc. We had recently reported that the SoftBank-backed firm was also in talks with banks to secure an up to $500 million loan facility.

Separately, Grab is also learnt to be exploring a bond option to raise up to $500 million, but it is yet to decide on it.

Grab had last raised money earlier this year when it raked in $856 million from Japan’s Mitsubishi UFJ Financial Group Inc (MUFG) and IT services firm TIS Inc to accelerate the expansion of its financial services. The financing, which was among the largest raised by Grab that has bagged $3 billion from SoftBank Group and $1 billion from Toyota, reportedly valued the company at around $15 billion.

Deal could hasten Grab’s IPO plans

Grab is currently staring at a deadline to launch its IPO by March 2023. If plans don’t materialise, it may have to pay over $2 billion to buy back Uber’s stake in it, per earlier deal terms between the two. Given that public markets had a tepid response to Uber’s IPO last year, investors are unlikely to appreciate the bonfire of capital that Grab, Gojek and the other unicorns indulge in.

Investors across both companies say a merger will help both companies stem losses, which could lead to a positive response from the markets, ‘if and when’ a listing were to happen. Several high-profile investors also acknowledged that a potential listing offered them the most likely opportunity to exit their investments.

Several industry watchers, as well as some investors in Grab, share the view that the company will prepare for a listing in 2021. Its president Ming Maa, who has been based in the US since last year, is said to have moved overseas to oversee the process.

Since it was founded in 2012, Grab has so far bagged total funding of over $9 billion in 29 rounds, putting an extensive list of investors on its cap table including Didi Chuxing, GGV Capital, SK Holdings and Tiger Global Management.

Gojek, meanwhile, has raised just over $5 billion since its inception in 2010. More than half of the total funding is accounted for by its ongoing Series F round. Its list of backers includes Temasek, KKR, Warburg Pincus and Tencent.

Currently, both decacorns have split the investor ecosystem in Southeast Asia, with Visa and Mitsubishi being the only common investors in both companies.

Secondary demand picks up

Interestingly, the market appears to have gotten wind of the momentum in the merger talks. This has seen some of the early investors from both companies, who had been attempting to offload shares at significant discounts in the private secondary market, pull back, or seek higher prices, DealStreetAsia has learnt.

Multiple executives tracking this space said Gojek’s shares were currently available in the secondary market at about 10-15 per cent discount to its $10 billion valuation. These shares were available at an average 40 per cent discount to its valuation at the beginning of this year.

In the case of Grab, too, average discounts in the secondary market are down to about 10 per cent, when compared to anywhere between 15 per cent and 40 per cent earlier.

“Earlier, the secondary market was mostly sellers. Now, when it comes to Grab and Gojek, the ratio of those seeking to sell and buy are evenly matched. This trend indicates something may be cooking,” said an industry executive tracking this space. This executive further added that the demand for Grab shares in the secondary market was significantly higher than that for Gojek.

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.