According to a Reuters report on Wednesday, U.S.-listed ride-hailing and food delivery company Grab plans to buy its smaller Indonesian competitor, GoTo, in the second quarter of the year, two sources familiar with the situation said.
Grab, which is based in Singapore, has brought in advisors to help with the planned deal, the two sources said. One of them also mentioned that the deal depends on certain conditions, like getting enough funding, and Grab is currently talking to banks about that.
Both Grab and GoTo declined to comment, according to the report.
Grab Co-Founder and CEO Anthony Tan declined to comment on TNGlobal’s query on Grab-GoTo merger news when asked at the GrabX event in Singapore last month.
Grab, which is supported by Uber, wants to buy GoTo’s businesses for about $7 billion, according to another person familiar with the plan. GoTo, which is listed on the Jakarta stock exchange, has seen its stock go up by 20% this year, bringing its market value to around $5.8 billion, based on data from LSEG.
Grab began as a ride-hailing service but has grown into a “super app” now offering food delivery, financial services, and more.
GoTo, which is backed by investors like SoftBank and Taobao China Holding, calls itself Indonesia’s biggest digital platform, offering services like online shopping and digital banking. SoftBank supports both GoTo and Grab.
“The combined entity would hold a market share of over 91 percent in Indonesia and almost 90 percent in Singapore,” said David Zhang, Euromonitor International’s insights manager of payments and lending in Asia.
“Markets, especially in Indonesia and Singapore, will impose strict scrutiny,” he said, adding that regulators will likely block the merger in key Southeast Asian markets.
Last month, Maybank Investment Bank’s research team said that if Grab buys Gojek, the deal could create benefits worth $2.4 billion. This would increase Grab’s overall value by 10%, and the company would still have a strong cash balance of $3.2 billion.
The research team said a merger between Grab and Gojek would likely happen, but GoTo’s financial technology and online shopping businesses would not be part of the deal.
Even though a Grab and Gojek merger would give them 80% to 90% of Indonesia’s ride-hailing market, the research team still believes the deal could go ahead. This is because their combined share would only be around 23% of the country’s total transport market, which is still considered manageable.
Maybank also predicts that a Grab and Gojek merger could create yearly synergies worth between $100 million and $200 million.
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