Indonesia’s two most valuable startups, ride-hailing giant Gojek and e-commerce provider PT Tokopedia, are finalizing terms for their merger and aiming to reach an agreement as early as this month, according to people familiar with the matter.
The two companies are discussing a variety of scenarios with the goal of ultimately listing the combined entity in both Jakarta and the U.S., said the people, asking not to be identified because the negotiations are private. The target valuation in the public markets is between $35 billion and $40 billion, one of the people said.
Representatives of Gojek and Tokopedia declined to comment.
The two startups plan to create an Indonesia internet powerhouse, at the leading edge of businesses from ride-hailing and digital payments to online shopping and delivery. Bloomberg News first reported their merger talks in January.
“There is a strong possibility that the combined entity will get that kind of public market valuation, given the attention on the space,” said Angus Mackintosh, founder of CrossASEAN Research, which publishes on Smartkarma and has done an analysis on valuations of major internet firms. “As a bigger entity, it has a better chance of getting large amounts of capital to finance its future growth.”
The latest terms under discussion call for Gojek shareholders to own about 60% of the combined entity while Tokopedia’s investors hold 40%, said the people. Regardless of the ratio, both companies are approaching the transaction as a merger of equals, they said.
One of the scenarios being discussed is to combine the two companies before concurrently listing them in Indonesia and the U.S., one of the people said. Another scenario is to list Tokopedia in Jakarta first, then merge with Gojek before a listing of the combined entity in the U.S. The companies have yet to decide whether they’d opt to list in the U.S. via a traditional initial public offering or a special purpose acquisition company.
The talks are ongoing and it’s possible they take longer or fail to lead to a final agreement.
Gojek had been in discussions with ride-hailing rival Grab Holdings Inc. about a possible merger, but those talks dragged on and ultimately collapsed. Among other issues, that deal would likely have faced regulatory opposition since it would combine the two major providers of on-demand rides and delivery services in several Southeast Asian markets.
SoftBank Group Corp. founder Masayoshi Son, the biggest outside shareholder in Grab, had originally encouraged Grab Chief Executive Officer Anthony Tan to work out a deal with Gojek. But Son has since shifted his support to a Gojek-Tokopedia alliance.
“The Grab-Gojek deal would have been disastrous, especially in terms of job losses,” said Mackintosh. “With Gojek-Tokopedia, there is very little cross-over because they are doing different things and not trying to bite each other’s head off. They know each other well. The two companies will together enable a huge number of small enterprises. There is a lot of support in the background for the deal to happen.”
The two Indonesian tech pioneers have common investors, including Google, Temasek Holdings Pte and Sequoia Capital India. Their founders have also been friends since their inception more than 10 years ago.
If the combined Gojek-Tokopedia proceeds with an IPO, it would give global investors another opportunity to bet on one of the world’s fastest-growing internet economies. Shares of Sea Ltd., the only major Southeast Asian internet company listed in the U.S., climbed almost 400% last year, boosted by the growing popularity of its mobile gaming and online shopping platform.
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