SoftBank Group Corp.’s Masayoshi Son is stepping up pressure on Grab Holdings Inc co-founder Anthony Tan to work out a ceasefire with archrival Gojek, according to people familiar with the matter.
Southeast Asia’s two most valuable startups are actively engaged on regular Zoom calls after months of off-and-on discussions and making progress toward an agreement, said the people, asking not to be identified because the talks are private. A key sticking point remains whether the two companies merge all operations or whether Grab acquires Gojek’s business only in Indonesia.
Tan, Grab’s chief executive officer, prefers the narrower acquisition, which would give him more control after the deal and allow him to run the Indonesia business as a subsidiary of Grab, the people said. The 38-year-old would also face less dilution of his personal stake.
Gojek’s shareholders are pushing for a combination throughout Southeast Asia because they would end up with more of the merged business, they said. Son, Grab’s biggest investor, is conceptually aligned with Gojek shareholders for a regional deal, they said.
The talks underscore tensions between Tan and the Japanese billionaire, who has been a steadfast supporter of the entrepreneur’s vision for Grab. The ride-hailing service has expanded into food delivery and digital payments and aims to create an all-in-one “super app” for Southeast Asia. But the company’s losses have started to wear on Son and other backers, especially after the implosion of SoftBank-backed WeWork and the coronavirus pandemic that’s hit businesses in the region.
Representatives of Grab, Gojek and SoftBank declined to comment. The talks are fluid and may not result in a transaction, the people said.
One overarching concern is whether regulators would fight a combination of the region’s two leading ride-hailing providers, with overlapping operations in several other fields.
SoftBank has also been frustrated that animosity between the two companies has interfered with what looks like an obvious opportunity, one of the people said. Son visited Indonesia late last year and has since joined calls to press for a deal, the person said.
Grab and Gojek have been locked in a fierce, expensive battle for dominance in the last several years, so combining forces would reduce cash burn and create one of the most powerful internet companies in the region. Grab, which is present in eight countries, was last valued at about $14 billion, while Gojek, valued at $10 billion, operates in Indonesia, Singapore, Thailand and Vietnam.
Investors also worry about rising competition from hard-charging rivals such as Sea Ltd., which went public in 2017 and already has a market value of about $82 billion. The Singapore-based company’s e-commerce unit Shopee and digital payments service ShopeePay have been expanding rapidly across Southeast Asia recently.
The two rivals have a long list of backers. Grab’s shareholders include Uber Technologies Inc., Tiger Global Management LLC and Toyota Motor Corp. Gojek counts Google, Tencent Holdings Ltd., KKR and Warburg Pincus among its shareholders.
The two sides are negotiating over the structure and valuations, as well as ways to mitigate the concerns of antitrust regulators. The deal may also depend on how long fallout from the pandemic lasts, which would impact the companies’ cash flow, according to the people.
Grab has been trying to raise fresh capital. It’s in talks with Alibaba Group Holding Ltd. to secure about $3 billion investment, Bloomberg News has reported. The startup has been burning through cash: its Singaporean ride-hailing unit lost more than $200 million in 2019, filings show. And since the outbreak of the coronavirus, the company has also expanded its deliveries of daily essentials, as well as on-demand concierge services. In August, the firm announced a slew of financial services and products.