By: Qinthara Fasya, DigitalCFO | 25 May 2021
Photo from Nikkei Asia
Two of Indonesia’s largest tech startups, Gojek and Tokopedia, announced on Monday they will merge and look to go public this year, a move that will create one of Southeast Asia’s biggest tech conglomerates and cover everything from ride-hailing and digital payments to e-commerce.
The merger will reshape the competitive landscape of the region’s tech scene, which will now primarily be based around a three-way battle of the titans between Singapore-based Sea, Grab and the newly formed GoTo Group, which will bring together Gojek and Tokopedia.
Gojek, with its “superapp” for booking rides and other services, and e-commerce-focused Tokopedia announced in a joint news release that they have “combined their business” with a total valuation based on past fundraising rounds of about $18 billion. They said that is the “largest ever in Indonesia and the largest between two Asia-based Internet and media services companies to date.”
GoTo will act as the holding company. Both Gojek and Tokopedia will continue to operate as separate businesses but “with heavy emphasis on how… to create better innovation and better synergies for our collective users, merchants, and drivers,” Andre Soelistyo, Gojek’s co-CEO who will become the group CEO, said during an online news conference on Monday.
Gojek’s financial arm, rebranded as GoTo Financial, will also be housed under the holding company.
Both Gojek and Tokopedia did not disclose the shareholding structure of the combined entity, but Soelistyo said the group is a “partnership of equals.”
The companies began concrete discussions over a possible merger earlier this year, and negotiations accelerated in early April when both sides moved to seek approval from their respective investors.
They each count U.S. tech giant Google and Singapore’s state investor Temasek among their shareholders. Other investors in Gojek include Facebook, which invested in the company’s payment arm, global private equity company KKR as well as Indonesian conglomerate Astra International. Tokopedia’s biggest shareholder is SoftBank, followed by Chinese e-commerce giant Alibaba.
The companies said that GoTo Group has the backing of its “major investors.”
Aside from group CEO Soelistyo, Tokopedia President Patrick Cao will serve as group president. Kevin Aluwi, Gojek’s other co-CEO, will be the CEO of Gojek, while William Tanuwijaya, founder of Tokopedia, will be the e-commerce giant’s CEO.
“Gojek drivers will deliver even more Tokopedia packages, merchant partners of all sizes will benefit from strengthened business solutions and we will use our combined scale to increase financial inclusion in an emerging region with untapped growth potential,” Soelistyo said in the release.
“For the consumer, GoTo Group will continue to reduce frictions and provide best in class delivery of goods and services. This is the next step of an exciting journey and I am humbled and proud to lead the Go To movement,” he said.
The companies said they had a total group gross transaction value of over $22 billion in 2020, and over 100 million monthly active users. Besides Indonesia, Gojek has a presence in Thailand, Vietnam, Singapore and the Philippines, while Tokopedia operates in Indonesia only. The group’s executives said their plan for e-commerce is to continue to invest in Indonesia, but did not rule out the possibility of expanding to other Southeast Asian countries.
Gojek initially held merger discussions with Grab last year, but the deal collapsed as they could not reach an agreement on the shareholding ratio of a combined entity. Grab has since announced plans to go public in the U.S. via a special purpose acquisition company, or SPAC, seeking a valuation of $39.6 billion in what would be the biggest-ever deal of its kind.
The decision to merge comes as competition in the region’s tech sector heats up, especially as Sea makes aggressive inroads into sectors that had been the stomping ground of Gojek and Tokopedia.
Sea, the region’s biggest tech company by market capitalization, has expanded into areas such as e-commerce and food delivery by offering aggressive promotions, backed by a fat war chest it built up through its ability to tap the public market.
Grab’s SPAC deal also means it will have the ability to access the public market to fund its spending to survive the competition, while other tech companies like Indonesia’s travel tech startup Traveloka are also seeking to go public.
Cao, the GoTo president, said at the event that the group will “pursue an IPO by the end of this year” under a dual listing format. He did not mention the markets, but sources have said it is looking at Indonesia and the U.S. Cao added that the group is “not ruling out any options” on how to do so including using a SPAC.
Sources have said when it does go public, it will aim for a valuation similar to or higher than Grab’s, as the entity will have an e-commerce arm, which would be more appealing to potential investors.
A merger between Gojek and Tokopedia will face less regulatory scrutiny than a Gojek-Grab merger, as their business overlaps are limited. However, a potential hurdle may be their payment services. Tokopedia is a major shareholder in digital payment service OVO, while Gojek operates GoPay. Both are two of the largest digital payments services in Indonesia.
Cao said the group will comply with regulators, but added that one of the options under consideration is a “potential divestment” of OVO shares.
One official at Indonesia’s Business Competition Supervisory Commission said that the agency will look carefully into the deal, as “integration of a digital platform may raise issues of abusive behavior and potential for eliminating competition by dominant business actors.”
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