Indonesia’s Gojek and Tokopedia agree $18bn merger
Gojek and Tokopedia, Indonesia’s two biggest start-ups, have agreed to a merger that will create an $18bn food delivery, ride-hailing and ecommerce group with reach across south-east Asia.
The merged company, which will be renamed GoTo, will begin preparing for a dual listing in Indonesia and the US later this year, according to group executives. It will target a public market valuation of up to $40bn, two people familiar with the company’s plans said. The $18bn figure was based on fundraisings in 2019 and 2020.
The deal will create the biggest privately held technology start-up in south-east Asia and give the group added firepower against well-funded regional rivals including “super app” Grab and ecommerce platform Shopee, backed by Japan’s SoftBank and China’s Tencent, respectively.
SoftBank and Tencent also stand to benefit from the GoTo merger, as respective investors in Tokopedia and Gojek. Other investors that have backed the deal include Alibaba, Facebook, Visa and Google.
News of the union provided more evidence of how south-east Asia’s fast-growing technology industry is coming of age. Investors have been drawn to the region of 655m people partly because it has been less affected by US-China tensions. Foreign investment in India, particularly from China, has also run into obstacles.
The merger announcement came weeks after Singapore-headquartered Grab, which offers delivery, ride-hailing and financial services, announced a record merger with a blank cheque vehicle. The deal valued Grab at $40bn, and it will list on the Nasdaq this year.
The US-listed shares of Sea Group, the parent company of Shopee and gaming arm Garena, surged 395 per cent last year.
While Gojek has operations in several countries in south-east Asia, GoTo will have its strongest presence in Indonesia, the region’s largest economy and the world’s fourth most populous country. The merged entity counts more than 100m monthly active users on its platforms and a total group gross transaction value of more than $22bn in 2020.
“Even if GoTo were to focus just on Indonesia . . . if it can capture most market share in the areas it focuses on it is quite an opportunity, especially in financial services,” said Zennon Kapron, director of Asia-focused fintech research and consulting group Kapronasia. “Indonesians are some of the least banked and most underbanked in the region.”
Gojek co-chief executive Andre Soelistyo will lead the combined business with Tokopedia’s Patrick Cao as president. Gojek’s other co-chief executive Kevin Aluwi will continue as head of that business, and William Tanuwijaya will remain chief executive of Tokopedia. Goldman Sachs and Citi acted as advisors.
Both companies’ platforms and apps, which come under the newly formed holding company, will run independently but there will be some cross pollination, executives said. Gojek will hold more of the holding company in a roughly 58 per cent to 42 per cent split, two people with direct knowledge of the deal added.
“We have Gojek’s high volume, high frequency mobility transactions, combined with Tokopedia’s high value, medium frequency ecommerce transactions,” said Cao. “GoTo will account for more than 2 per cent of gross domestic product in Indonesia and we’re going to create a lot more employment and income earning opportunities as our company and the economy expand.”
Sea, Grab and GoTo are likely to continue burning through cash to compete across south-east Asia, as all three companies increasingly focus on offering financial services to the region’s underbanked population.
Indonesia remains GoTo’s biggest market but the company’s future lies beyond just one economy, said Gojek’s Aluwi, adding there was a lot of opportunity to create “new products and new experiences”.
Gojek and Tokopedia’s union will create a more compelling narrative to sell to public market investors but their combination does not automatically put them ahead of their existing rivals, analysts said.
“Collectively they are better off but [the deal] won’t answer all the problems they have,” said Roshan Raj, a partner for consultancy Redseer. “If Shopee remains aggressive then Tokopedia has to solve that at the ecommerce level — it can’t be passed on to the larger platform.”
Investors said GoTo’s strength will be its reach across a range of sectors.
“There is no modern internet company, in any part the world that I’m aware of, that has such deep ownership of so many categories at the same time,” said Shailendra Singh, managing director of Sequoia Capital India, which has invested in both companies.
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