Grab, Gojek resume merger talks backed by Masayoshi Son

The development comes as the two companies struggle amid the pandemic. Their valuations have “fallen substantially” in the secondary market as Covid-19 drags on, according to the report.

Despite Grab being valued at US$14 billion at its most recent funding round in 2019, its shares have been trading at a 25% discount. Gojek, meanwhile, was valued at nearly US$10 billion last year, but it has also been selling at “steep discounts, particularly from early shareholders wanting to exit,” Financial Times reported, citing secondary market brokers.

A merger “could significantly accelerate both Grab and Gojek’s paths to profitability,” said Asad Hussain, an analyst at PitchBook.

These fresh merger talks come around six months after the duo began their initial discussions on the matter, which were then opposed by Grab shareholder SoftBank and its Vision Fund. At that time, Son believed that “the ride-hailing industry would be a monopoly industry,” according to the Financial Times, though people close to Son said he is now supportive of a merger.

That being said, Indonesia – currently Grab and Gojek’s largest market – could be a contentious subject.  Gojek founder Nadiem Makarim is a government minister, which gives his company political support and more power in deals conducted in the archipelago. “Gojek is the home team and governments back the local guy,” said one investor in the company.

The talks are also facing opposition from some senior Grab executives, “who fear they will not come out on top against long-term shareholders looking to exit their loss-making positions in the group,” according to the report.

The deal could be closely scrutinized by regulators as well, with mergers contributing to the possibility of job cuts especially amid the poor economic climate.

See also: Commentary: A Grab-Gojek merger makes sense but isn’t the smartest play