Tokopedia may sell its OVO stake to Grab to speed up merger with Gojek

Indonesian homegrown e-commerce platform Tokopedia is looking to divest its stake in the digital wallet OVO to Grab to safeguard its planned merger with the ride-hailing decacorn Gojek, sources privy to the matter told DealStreetAsia.

The fate of OVO, currently part-owned by Grab, has been a major sticking point in the Gojek-Tokopedia merger talks, even as both companies have approached their respective shareholders for the green light to seal a deal.

Bank Indonesia’s rules bar an entity from holding a controlling stake in more than one digital wallet in the country. The central bank norms thus prevent the proposed merged entity — “GoTo” — from becoming an owner in both OVO and Gojek’s payments platform GoPay.

Moreover, “Tokopedia would violate its agreement with OVO shareholders [inked at the time of buying the stake in 2018] if it merges with Gojek without selling OVO. Based on the agreement terms, they’re not supposed to transact or partner with Gojek. This means GoPay cannot be used as a payment option on Tokopedia, either. If that happens, beyond reputational impact, there would be financial and legal repercussions,” said another source on the condition of anonymity.

Grab and OVO declined to respond to DealStreetAsia’s queries, while Tokopedia had yet to respond at the time of publishing this article.

According to corporate filings in Indonesia and Singapore accessed by DealStreetAsia in October 2020, Grab holds 39.2% in OVO’s parent firm Bumi Cakrawala Perkasa through its subsidiary GP Network Asia.

Another 5% of Bumi is owned by PT Ide Teknologi Indonesia, a firm that is equally owned by Albert Lucius and Ignatius Agung Nugroho, the co-founders of the Indonesian fintech firm Kudo. Grab had fully acquired Kudo in 2017. Lucius currently serves as the chief production officer of OVO, while Nugroho is a senior director at Grab.

Tokopedia, meanwhile, holds a 36.1% stake in Bumi through its wholly-owned subsidiary Digital Investindo Jaya. Its co-founders Leontinus Alpha Edison and William Tanuwijaya own another 5% stake in Bumi through PT Wahana Innovasi Lestari that was acquired from Grab in February 2020.

The move would be a change of course for Tokopedia, which was earlier said to be against the idea of relinquishing its stake in OVO. After all, the app has been the leading e-wallet player on Tokopedia’s e-commerce platform since November 2018. It is also understood to be an essential play for both Tokopedia and Grab as both firms have failed to obtain a payments licence in Indonesia, which prompted them to acquire a stake in OVO in 2018.

However, it doesn’t mean OVO will disappear from the Tokopedia platform overnight. “OVO will stay in Tokopedia’s platform but only for a limited time,” said one of the sources.

Grab may need a local partner

For Grab, which recently became an investor in the Indonesian conglomerate Emtek, acquiring OVO will bring about portfolio synergies. The deal will strengthen Grab’s alliance with Emtek’s portfolio firms including the digital wallet DANA. It also may pave the way for a potential consolidation between DANA and OVO.

Yet, there are still legal hurdles to cross.

It will not be easy to shift Tokopedia’s stake in OVO’s parent Bumi to Grab, as it needs to comply with Bank Indonesia’s latest rules for payment systems that take effect from July 2021.

Non-bank payment services must have at least 15% Indonesian ownership. Besides, Indonesian individuals or entities must hold at least 51% of shares with voting rights or control. The current rules only cap foreign ownership at 49%, with no stipulations on voting rights.

In a scenario where Tokopedia offloads its stake in Bumi to Singapore-based Grab, the deal will run foul of the new rule.

A corporate law practitioner who DealStreetAsia spoke to noted one of Grab’s options could be  to “find a local JV partner that will be the controlling shareholder [in OVO].”

Bumi had clocked S$296.2 million ($217.2 million) in revenue in 2019, according to corporate filings by Singapore-based GP Network Asia, Grab’s arm. By comparing OVO’s revenue level with similar publicly-listed companies such as PayPal, PagSeguor, and Square Inc, DealStreetAsia estimates that OVO’s valuation should range between $3-4 billion.

Based on this, a potential transaction between Tokopedia and Grab may range between $1.08 billion and $1.4 billion.

Andi Haswidi contributed to this story.

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. 
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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.