Grab Holdings (GRAB) and GoTo Group (GTOFF), two of Southeast Asia's leading ride-hailing and food-delivery giants, have revived talks about a potential merger deal, Bloomberg News reports.
This move, which aims to cap the significant losses both companies have faced due to fierce competition in the region, is currently in the early stages of negotiation, the report states.
To be more specific, the discussions revolve around various scenarios, including Grab potentially acquiring GoTo through cash, stock, or a mix of both. The Indonesian company, under new CEO Patrick Walujo, has shown increased openness to such a deal.
The negotiations, which have been restarted several times, are reportedly being driven by major shareholders from both sides, however, it remains uncertain whether an agreement can be reached.
Among the options considered is also a market division strategy, where Grab would solidify its presence in Singapore and other regions, while GoTo would maintain its stronghold in Indonesia.
A significant challenge to any potential agreement is the valuation gap, exacerbated by GoTo's share price, which has fallen by about 30% over the last year. Other concerns include the structure of the deal and governance issues.
The merger would bring together tens of millions of users from both platforms, potentially allowing the combined entity to increase prices and achieve synergies, especially in competitive markets like Indonesia. The larger scale could also bolster their presence in more lucrative sectors such as digital payments and banking.
However, a merger of this magnitude, uniting two companies with a combined valuation of nearly $20 billion, would likely attract regulatory scrutiny, especially in markets like Indonesia and Singapore where they hold significant market shares.
Nevertheless, both companies are exploring solutions for these concerns as they view the merger as a crucial step towards profitability and a way to resolve their current financial challenges.