Southeast Asia’s biggest ride-hailing companies, Grab Holdings Ltd. and GoTo Group, have restarted talks for a merger, a potential blockbuster combination aimed at staunching years of losses at both companies resulting from tough competition between the two.
The companies, also the food-delivery leaders in the region of more than 650 million people, are in preliminary discussions about a variety of scenarios, people familiar with the matter said. One potential option is for Singapore-based Grab to acquire GoTo using cash, stock, or a combination of the two, one of the people said, adding that the Indonesian company is more open to a deal after Patrick Walujo took over as chief executive officer last year.
Discussions have been on and off, said one of the people, who asked not to be identified because the negotiations are private. Major shareholders of both companies support a deal, and have been driving the talks, the people said.
The talks may not lead to a full-blown merger or any deal, said the people. Options the companies have explored also include splitting up their main markets, with Grab gaining control of its Singapore home base and some other markets, while GoTo retains control in Indonesia.
Valuation remains a key hurdle to any deal, as GoTo shares have dropped about 30% in the past 12 months, the people said. Other concerns include deal structure and governance, they added.
A GoTo representative said “no such discussion is taking place,” while a Grab representative declined to comment.
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Each company has tens of millions of ride-hailing users, and a merger could help them raise rates and find synergies in major markets such as Indonesia where competition has kept prices low. A bigger size could also help the combined entity become stronger in higher-margin services such as digital payments and banking.
A deal between Southeast Asia’s most valuable internet companies — together worth almost US$20 billion ($26.94 billion) — would face intense scrutiny by regulators. The companies are the clear No. 1 and No. 2 in countries such as Indonesia and Singapore, and a merger could give them a dominant position in some markets. Uber Technologies Inc. left the region in 2018 in exchange for a stake in Grab, and smaller competitors have yet to make a major dent to Grab and GoTo’s duopoly in their top markets.
Still, the companies are weighing solutions for such concerns, the people said. The firms view a combination as a major step toward profitability, with their shares languishing amid mounting losses. Each company’s stock is down about 70% since their respective debuts a couple of years ago.
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Competition between Grab and GoTo has kept prices for consumers very low in countries like Indonesia. In Southeast Asia’s biggest market where the regulator also actively ensures rates are affordable, a scooter ride can cost less than US$1 and a car trip isn’t much more. That’s left the ride firms with pressure to expand in adjacent services such as deliveries and digital payments.
Grab and GoTo have considered a potential merger before in recent years. This time around, discussions restarted after GoTo relinquished control of its e-commerce unit Tokopedia to ByteDance Ltd.’s TikTok in December, one of the people said. That arrangement makes Grab and GoTo a potentially stronger match, they said.
One challenge to negotiations in the past has been control. Grab CEO Anthony Tan, who holds about 60% of the voting rights at his company, has advocated to lead any combined entity.
Walujo, who took over in June, managed to steer GoTo to profitability on an adjusted basis in the fourth quarter, a step forward in demonstrating to investors that the company has long-term earnings potential. The managing partner of shareholder Northstar Group has been a key catalyst for the rivals to come to the table this time, after the former leaders of GoTo’s two main businesses — Gojek chief Kevin Aluwi and Tokopedia head William Tanuwijaya — both stepped down.
Grab and GoTo have held on-and-off talks to combine without success in the past, after years of fierce competition in ride-hailing, food delivery and financial technology. A few years ago, the duo made substantial progress toward a deal, but talks waned as they clashed over how to manage key market Indonesia.
