Grab and GoTo, the two leading ride-hailing and food-delivery companies in Southeast Asia, have resumed talks for a potential merger, according to Bloomberg News.
The companies are exploring various options, including a cash-and-stock deal, a market split, or a partial acquisition, sources familiar with the matter said. The talks are driven by the major shareholders of both companies, who see a merger as a way to achieve profitability and market dominance in the region of over 650 million people.
Grab and GoTo have been fierce rivals for years, competing for customers and drivers across Indonesia, Singapore, and other countries. Both companies have expanded into other businesses, such as digital payments, e-commerce, and online banking, to diversify their revenue streams and fend off competition from other players, such as Uber Technologies Inc., which exited the region in 2018.
However, both companies have also struggled to turn a profit, as they have been spending heavily on subsidies, incentives, and marketing to gain and retain users. Their share prices have plummeted since their respective public listings a couple of years ago, reflecting investor skepticism about their growth prospects and valuation.
A merger between Grab and GoTo could create a regional powerhouse, with a combined valuation of almost $20 billion, and a user base of tens of millions. It could also help them reduce costs, increase prices, and leverage synergies in their core and emerging businesses. Moreover, it could strengthen their position in the fast-growing and lucrative digital finance sector, as both companies have secured licenses to offer banking services in Singapore and Indonesia.
However, a merger between Grab and GoTo would also face significant challenges, such as regulatory scrutiny, valuation gap, deal structure, and governance issues. The companies would have to convince the authorities that their combination would not harm competition or consumer welfare in their markets. They would also have to agree on a fair valuation for each company, as well as the ownership and control of the merged entity.
The talks between Grab and GoTo are still at an early stage, and there is no guarantee that they will result in a deal, the sources said. A representative from GoTo denied that any such discussion was taking place, while a representative from Grab declined to comment.