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Indonesian ridesharing and payments giant Gojek is in advanced merger discussions with local e-commerce pioneer PT Tokopedia, ahead of a planned initial public offering of the combined entity, according to people familiar with the matter.
The country’s two most valuable startups have signed a detailed condition sheet to conduct due diligence on their respective businesses, said the people, who have asked not to be named because the discussions are private. Both sides see potential synergies and want to close the deal as soon as possible in the coming months, they said.
The merged entity would create an Indonesian powerhouse worth around $ 18 billion, with Gojek and Tokopedia set at around $ 10.5 billion and $ 7.5 billion respectively in the talks, according to those involved. Their businesses range from ridesharing and payments to online shopping and delivery – a local mashup of Uber Technologies Inc., PayPal Holdings Inc., Amazon.com Inc. and DoorDash Inc. It plans to go public in the United States. and Indonesia.
“This is potentially a successful deal,” said Usman Akhtar, partner of Bain & Co. in Singapore. “The deal would have a lot of impact outside of these two companies and would have ripple effects that aren’t even all known yet.”
Gojek and Tokopedia have been considering a potential merger since 2018, but talks have accelerated after deal negotiations between Gojek and rival Grab Holdings Inc. stalled, people said. Grab CEO Anthony Tan continues to resist pressure from Masayoshi Son of SoftBank Group Corp. for him to relinquish some control in an entity combined with Gojek, the people said.
Anthony Tan, Group CEO and Co-Founder of Grab Holdings Inc [File: Bloomberg]
Southeast Asia’s two most valuable startups – worth a total of around $ 25 billion – have had intermittent talks to combine after years of fierce competition in ridesharing, delivery of food and financial technologies. As late as December, the companies are said to have made substantial progress in crafting a deal to combine, people with knowledge of the talks told Bloomberg News. But they clashed over how to handle Indonesia, the region’s key market.
Son, who had been a strong supporter of Tan in the past, is losing patience with the reluctance of Grab’s co-founder to cede some control and now supports a merger between Gojek and Tokopedia, backed by SoftBank, the people said. The two local tech pioneers have joint investors, including Google, Temasek Holdings Pte and Sequoia Capital India. Tokopedia is also backed by Alibaba Group Holding Ltd., which has its own e-commerce unit in the region, Lazada.
Representatives for Gojek and Tokopedia declined to comment.
The companies are now discussing merger ratios that would give each party a substantial equity stake, the people said. The founders of the two companies have been friends since their creation more than 10 years ago and anticipate an amicable alliance. The talks over Grab and Gojek were more controversial and hadn’t progressed enough for them to sign a condition sheet, people said.
A combination of Gojek and Tokopedia would dominate in Indonesia, one of the fastest growing internet economies in the world. Their planned US listing would provide global investors with an alternative to Sea Ltd., Southeast Asia’s only major internet company listed in US Sea shares, which climbed nearly 400% last year. , driven by the growing popularity of its mobile gaming and online shopping platform.
A deal between Gojek and Tokopedia is likely to encounter less regulatory opposition than the previously contemplated deal. The combination of Grab and Gojek would reduce competition in digital transportation, delivery and payments in Southeast Asia, a prospect government officials have already expressed reservations about.
The companies are considering several options for a public offering. They could choose a traditional IPO in Indonesia and the United States or work with a blank check company for the U.S. listing, one of the people said. A handful of blank check companies have had discussions with the two companies in recent months, the person said.
“Southeast Asian unicorns are entering a phase of maturity where investors demand an exit, such as a commercial sale or an IPO,” said Mark Robinson, head of technology, media and telecommunications for the Asia-Pacific region of the international law firm Herbert Smith Freehills. “This prompts companies to consider a plethora of options, some innovative and challenging.”
Tokopedia said last month it hired Morgan Stanley and Citigroup Inc. as advisors to help speed up its going public, following a Bloomberg News report that the check firm Bridgetown Holdings Ltd. en blanc backed by billionaires Richard Li and Peter Thiel, is considering a potential merger with the e-commerce giant. The special purpose acquisition company is exploring the structure and feasibility of a deal with Tokopedia.
“We haven’t decided which market and method yet, and we’re still considering options,” the Jakarta-based company said in a Dec. 16 statement. “PSPC is a potential option we could consider, but we are not committed to anything yet.”
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