Singapore

ALIBABA is said to be in talks to invest an eye-watering US$3 billion in South-east Asian ride-hailing firm Grab. Observers say that the deal, if it bears fruit, could complicate efforts for a reported merger between Grab and rival Gojek.

On Monday, Bloomberg reported that Alibaba is in talks with Grab over the US$3 billion investment, part of which would be used to acquire some of the Grab stock held by US ride-hailing firm Uber Technologies.

Uber held a 23.2 per cent stake in Grab as at end-2018, which the US-based ride-hailing giant had acquired when it exited South-east Asia. Grab faces a US$2 billion payout to Uber if it does not list by March 2023.

News of a potential investment from Alibaba comes just days after media reports stated that Gojek and Grab have resumed merger talks with SoftBank's urging, but negotiations remain tough.

If the Alibaba investment goes through, it would probably be the Chinese e-commerce giant's largest deal in South-east Asia after it spent US$4 billion to take control of Singapore-headquartered Lazada.

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But Alibaba's entry could intensify antitrust concerns related to a Grab-Gojek merger.

"(As) if a Grab-Gojek merger was not difficult enough, the entrance of Alibaba and its associated business will increase regulatory scrutiny," said Justin Tang, director and head of Asian research at advisory group United First Partners.

He pointed out that if there is insufficient competition to the merged entity, regulators may have to impose behavioural or structural remedies. The former involves restricting certain actions, while the latter may require divesting certain units.

Then there is the issue of potential investor conflict. Alibaba and its rival tech major Tencent do not invest in the same companies, Joel Shen, a tech lawyer at global law firm Withers, pointed out.

"So if Grab and Gojek were to merge, we may find ourselves in the unprecedented situation where both Alibaba and Tencent feature prominently in the capitalisation table. Although it is too early to tell at this stage, this may then set the stage for future consolidation in different verticals," he said.

Some observers, however, are more sceptical about whether the Alibaba investment will actually materialise. One observer familiar with such transactions speculated that the discussions may have been deliberately leaked to publicly strengthen the negotiating power of certain parties in the Grab-Gojek merger talks.

Reports of Alibaba wanting to invest in Grab previously surfaced in 2018. TechCrunch reported that SoftBank, which owns a stake in Alibaba, had previously assisted the group in securing its investment in Indonesian e-commerce player Tokopedia ahead of rival Tencent. In return, SoftBank is said to have attached a condition to the Tokopedia deal that Alibaba would invest in Grab, the report said.

One of the unknowns is how large a stake in Grab a US$3 billion investment would actually hand over to Alibaba. Some reckon that even if Alibaba does not gain control of Grab, it still stands to benefit.

"For Alibaba, it gives them an opportunity to build some synergy with a major regional tech company without the burden of taking control, as its experience with Lazada and a few Ant ventures showed that operating (in South-east Asia) is not easy," said Li Jianggan, chief executive of venture builder Momentum Works.

The prospect of the Alibaba-Grab deal is especially interesting in light of ongoing consolidation in the Indonesian payments space, Mr Li pointed out. Grab-backed Ovo has reportedly been in merger talks with Dana, backed by Alibaba affiliate Ant Financial.

"The potential Ovo-Dana merger, if coupled with the Alibaba-Grab investment, will make some interesting dynamics in payment and financial services in Indonesia," he said.