Sea’s shadow looms over a Gojek-Tokopedia merger

As Gojek and Tokopedia face strong competition at home, a merger would refresh their narrative – and prime them for a public listing.

But it would also put the merged entity right in the middle of Sea’s crosshairs. The rivals would go head-to-head in ecommerce, digital payments, financial services, and potentially, food delivery.

Forrest Li, founder and group CEO, Sea / Photo credit: Sea

It’s a chicken-and-egg situation. While fresh capital from a Gojek-Tokopedia IPO would level the playing field, keeping up with Sea’s capacity for cash burn would require the merged entity to deploy that capital more intensely.

A deal of this size would involve a myriad of stakeholders, all with their own interests. Rivals Alibaba and Tencent, for instance, may end up in the same cap table.

But considering Sea’s looming shadow, those concerns may take a back seat.

“At the end of the day, the enemy isn’t Grab, Gojek, or Tokopedia – the enemy is Sea Group,” says Joel Shen, a special counsel at law firm Withersworldwide. “As long as Sea Group was happy to remain a profitable gaming company and stay in its lane, then I don’t think anyone would have been terribly concerned.”

A compelling narrative

For Gojek, the Tokopedia merger would not solve its existing problem: a price war with competitors in what has become a commoditized business.

Aldi Hartanto, vice president of investments at MDI Ventures, says that for commoditized businesses in markets like China, Russia, or the Middle East, the solution is clear: an “emergent” acquisition, where big companies buy small companies or global businesses acquire local players.

“[Those companies] simply want to eliminate competition, which would allow them to start rationalizing their prices and unit economics,” he explains. “A Gojek-Tokopedia merger would not solve this for Gojek, especially on the ride-hailing side.”

Instead, what the merger can do is build a compelling narrative: the combined Gojek-Tokopedia entity as Indonesia’s first Big Tech company.

This would help both firms raise more capital – whether through existing investors topping up or ultimately an IPO. Listing on the Indonesia Stock Exchange would finally give local retail investors a chance to invest in two household names.

Tokopedia CEO William Tanuwijaya / Photo credit: Tokopedia