Grab-GoTo deal buzz returns: why it might be real this time

Is it Groundhog Day again?

Last February, Grab and GoTo Group were said to have reopened merger talks. A year later, like clockwork, reports have resurfaced that the merger is apparently in the works – again.

Image credit: Timmy Loen

This time, the deal might value the Indonesian player at more than US$7 billion. Bloomberg reports that one option being discussed is an all-share purchase, which would value GoTo at over 100 rupiah (US$0.006) per share, a premium of about 20% over its value before news of the potential deal broke.

One might be forgiven for feeling like they’re in a time loop – just like in the 1993 American comedy Groundhog Day, where a weatherman is forced to relive February 2 repeatedly.

See also: GoTo plus Grab: The merger that neither needs and regulators don’t want

Last year, we explained why such a deal would be “easier said than done,” notwithstanding the fact that the leadership changes at GoTo and its focus on ride-hailing following the sale of the Tokopedia stake to TikTok resulted in better alignment for both sides.

However, there have been changes over the past year that would make this deal even more likely.

Grab and GoTo declined to comment on this story.

Grab shares to the moon

One big factor is the divergence between the share prices of the two companies.

Grab’s shares are up around 45% over the past year – before the reports came out – while GoTo’s have stagnated.

That makes an all-share deal more advantageous for Grab, since it would give up a smaller number of shares in order to make an acquisition at the same value.

GoTo shareholders keen to exit?

Some of GoTo’s shareholders are funds, and the passage of every year brings these funds closer to the end of their lifespan, after which they have to return proceeds to their investors.

Private equity funds typically have a fund life of around 10 years, with optional extensions of up to three years. Many funds invested in Gojek or Tokopedia between 2014 and 2018, which means their limited partners may be expecting returns soon.

Market reaction more positive

New leadership