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Indonesia’s two most valuable startups are in advanced talks to merge and go public during the year, creating a technology empire valued at more than $ 18 billion that would be one of the largest companies in Southeast Asia.
Payment and ride-sharing group Gojek and e-commerce unicorn Tokopedia have signed a term sheet and will be conducting due diligence over the next several months, three people familiar with the negotiations said.
The approval of Japanese billionaire Masayoshi Son, whose company SoftBank has invested in Tokopedia, has given the deal additional weight, one of the people said.
The deal is unexpected given that Gojek spent much of 2020 in merger discussions with Grab, its main rival in the region. But a deadlock between the two ride-sharing companies in December on ownership structure opened an opportunity for Tokopedia, which had discussed a deal with Gojek as early as 2018.
Gojek, Tokopedia, SoftBank and Grab declined to comment on the merger talks, which were first reported by Bloomberg.
The Tokopedia-Gojek alliance would create a national technology champion for Indonesia, the fourth most populous country in the world, which is struggling to contain the economic consequences of the coronavirus pandemic. It would be the sixth largest listed company behind Unilever Indonesia with a combined total of 138 million monthly active users.
“The vision here is to do what Alibaba and Amazon have accomplished with e-commerce and logistics,” said a person with direct knowledge of the discussions.
Neither company, both founded in 2009, is profitable. But they count as investors some of the world’s largest tech groups, including US tech giants Google, Facebook, Microsoft and PayPal and China’s Alibaba, Tencent and Meituan.
News of the talks followed Tokopedia’s December announcement that it was seeking a public listing this year.
Unlike Grab and Gojek, who have a history of acrimony, the founders of Tokopedia and Gojek have friendly relations and the companies already partner for logistics and payment services.
Financial services would be a particular focus, leveraging Gojek’s popular GoPay payment platform and Tokopedia’s millions of shoppers.
Frank Troise, managing director and chief executive officer of SoHo Advisors, a fintech investment bank, said the deal would lower customer acquisition costs for both companies, allowing for many cross-selling opportunities.
“This is a fantastic move to diversify fintech into the key Southeast Asian market, rather than just duplicating a carpool value proposition that only benefits certain key stakeholders and shareholders,” he said.
The merged entity would have a holding company, similar to Alphabet and Google, which would be listed on the Indonesian stock market in the second half of the year. A second listing on a market such as Nasdaq is also being considered.
Management details are still being negotiated, but Tokopedia CEO William Tanuwijaya is likely to run the e-commerce business, while Gojek joint CEOs Andre Soelistyo and Kevin Aluwi are handling the services. financial and ride-sharing.
The deal is unlikely to raise the same antitrust concerns as a Gojek-Grab alliance, to which some delivery and transit drivers had already voiced their opposition.
But both companies are still burning funds that compete with rivals – Tokopedia with Lazada, owned by Alibaba, and Shopee, backed by Tencent, and Gojek with Grab, in several Southeast Asian countries in addition to Indonesia.
“Those rivals will not disappear in the event of a deal, so profitability and cash spending remain issues,” said one analyst.
