Making sense of Grab’s Jaya Grocer acquisition

When Grab went to market in 2012, its business model was a straightforward one: being an asset-light go-between.

It provided a platform to bridge consumers with services such as ride-hailing and food delivery, and it charged both sides of the supply-demand divide in bringing them together.

Things changed after Grab listed on Nasdaq on December 3, raising US$4.5 billion in the process. Less than two weeks later, on December 13, it announced its maiden purchase after going public – a physical asset by way of Malaysian grocery chain Jaya Grocer.

Industry insiders who spoke to Tech in Asia believe that the move from being asset-light to owning physical assets marked not only a shift in Grab’s business model, but also a coming-of-age for the ride-hailing giant, which went from a scrappy startup to a publicly listed multinational group.

The industry insiders added that the acquisition is a positive for Grab in growing its business vertical, but they also warned that the grocery space, together with quick commerce (q-commerce), is heating up.

Breaking down the deal

Grab didn’t disclose how much it’s going to pay to buy Jaya Grocer, which runs 40 stores across Peninsular Malaysia. However, Kuala Lumpur-based fund managers and investment bankers covering the consumer and retail sectors estimate that the deal costs anywhere between 1.5 billion and 1.8 billion ringgit (between US$358.6 million and US$430.3 million).

See also: Grab to buy Malaysian grocery major

Coincidentally, Grab’s purchase also came just 17 days after Jaya Grocer’s founders, the Teng family, bought back their entire stake in the grocery chain from AIGF Advisors, which surfaced as a shareholder in 2016 after investing 300 million ringgit (US$71.7 million) in Jaya Grocer.

The Teng family bought back AIGF’s 45% stake for about 411 million ringgit (US$98.2 million), according to business publication The Edge. This means that the family possibly got a sweet deal from buying back its stake and selling it to Grab.

Teng Yew Huat is Jaya Grocer’s major shareholder, owning 55% of the company.

A ‘strategic move’

Victor Chua, managing partner of Kuala Lumpur-based VC firm Vynn Capital, dubbed Grab’s acquisition as a “strategic move” for two reasons.

“Firstly, it is a move to further strengthen its value chain by moving down the supply chain to better optimize operations and profits,” Chua explains. “Secondly, to have a more holistic online-offline two-pronged model. Either of these reasons contribute toward Grab’s ambition to be a super app.”

Another potential benefit is that Grab users can access one merchant with a wide assortment of products – Jaya Grocer – for all their groceries, rather than visiting a minimart via the app only to find that certain products aren’t available. This makes Grab more competitive against Lazada and Shopee.

Intense competition

Bullish on deliveries

Lockdown dependent?

May not be easily replicable