In what could be a major consolidation in the Vietnamese e-commerce space, JD.com-backed Tiki and SoftBank Ventures Asia-backed Sendo are said to have agreed to merge their businesses in an all-stock deal, according to multiple people privy to the matter.
“The discussion is serious, and shareholders are aligned,” one of the people mentioned above said.
Tiki and Sendo are said to be working with local regulators, including the antitrust authorities, to secure their approval for the merger, according to the sources. In its annual report released last month, the Vietnam Competition and Consumer Authority confirmed it has received a merger notification from Tiki and Sendo.
The development is in line with DealStreetAsia’s February report that the Vietnamese e-commerce startups were in initial talks to merge with each other.
While the exact contours of the merger and the structure of the deal are unclear, it is understood that the two brands would be retained under a holding company. The startups do not have common investors, according to business registration papers seen by DealStreetAsia.
Foreign shareholding in Tiki and Sendo stands at 49.7 per cent and 63.1 per cent, respectively, according to the documents.
Vietnam’s new competition law, which took effect in mid-2019, removed an earlier threshold of a 50 per cent combined market share that prohibited deals resulting in “economic concentration.” Instead, it now says such a deal is prohibited if it has a significant impact on reducing competition in the local market.
The Sendo-Tiki merger will be evaluated by the National Competition Committee on criteria including the players’ dominance before and after the deal, including their combined market share; the relationship of the businesses to the supply chain; competitive advantages after consolidation; the potential of significant pricing increases; and the ability of the combine to hinder competition after the deal.
However, the law also takes into consideration the positive impact of an M&A deal, including promoting technology innovation and small and medium enterprises.
“To sustain an e-commerce platform, it requires a great deal of investment that is not viable for an SME. Only the giants have succeeded in this sector. The new law has erased the prejudice that consolidating and becoming bigger is bad for competition,” commented Nguyen Anh Tuan, founding partner of law firm LNT & Partners.
Sendo and its investors, FPT and SoftBank Ventures Asia, as well as Tiki’s backers JD.com and Korea Investment Partners did not comment for this article. Tiki and other investors did not respond to DealStreetAsia’s queries before the time of publishing.
Industry watchers have said that a potential merger between Tiki and Sendo would not see them cannibalising each other’s operations as both companies have different business models and audience profiles.
Tiki largely caters to consumers in big cities – primarily Hanoi and Ho Chi Minh City — who are conscious about authorised, origin-traceable goods. Sendo is more popular among users in the suburban and rural areas of Vietnam. A merger would instantly give the combined entity nationwide coverage and a larger, varied consumer base. Joining forces was also seen as an easier way for these companies to raise funding.
Both Tiki and Sendo are the biggest funded homegrown e-commerce platforms.
Tiki’s latest equity financing was led by private equity major Northstar Group. While the value of the investment was not disclosed, we reported in 2019 that Tiki was looking to raise $75 million in a round, which could potentially be upsized to $100 million.
Before that, the startup had snapped up nearly $62 million from investors including CyberAgent Capital, Sumitomo Corporation, Vietnamese unicorn VNG, Chinese retailer JD.com, Singapore’s EDBI, as well as South Korean funds SparkLabs Ventures, Korea Investment Partners and STIC Investments.
The company has also raised a debt venture round from InnoVen Capital. Singapore state investor Temasek and United Overseas Bank (UOB) joined the round, according to Crunchbase. Email requests sent to Temasek and UOB did not elicit a response at the time of publishing this article.
Meanwhile, Sendo has gathered more than $130 million to date. A spinoff of Vietnam’s pioneering IT firm FPT, Sendo raised $61 million in a Series C round from existing investors and new backers including Indonesian venture capital firm EV Growth and Thai Kasikornbank‘s VC arm Beacon Venture Capital. Other shareholders of the firm include SBI Holdings, Softbank Ventures Asia, Beenext, Beenos, Daiwa PI Partners and Econtext Asia.