Grab's US$39.6b SPAC deal comes with bells and whistles
Singapore
GRAB is set to go public at a US$39.6 billion valuation via an upcoming merger with Altimeter Growth, a special purpose acquisition company (SPAC). This is set to be the largest-ever SPAC merger.
Grab's deal comes with two atypical features: a three-year lockup period and a backstop. This is notable as SPACs have attracted criticism over the lack of safeguards to ensure long-term sponsor commitment.
Under the lockup condition, Altimeter's sponsor promote shares - the equity in the SPAC that it took in exchange for finding a company to take public - are subject to a three-year tie-up instead of the usual one.
Altimeter Capital Management and its affiliates will also commit funds to "backstop" up to US$500 million of potential share redemptions by shareholders.
This is meant to provide more certainty for Grab on the cash it can raise via the listing.
"It underscores the long-term commitment of the merged company's senior management. I think it's a good sign," Robson Lee, partner at law firm Gibson Dunn, told The Business Times.
Altimeter is also donating 10 per cent of its promote shares to support the GrabForGood fund announced last week, which was set up to support long-term social and environmental impact programmes.
Grab expects to raise about US$4.5 billion in cash proceeds from the transaction.
This includes more than US$4 billion from a fully committed PIPE (private investment in public equity) deal led by funds managed by Altimeter Capital Management, which committed US$750 million.
The PIPE deal also drew participation from funds and accounts managed or advised by BlackRock, Counterpoint Global (Morgan Stanley Investment Management) and T Rowe Price Associates.
Other investors include Temasek, Fidelity International, Fidelity Management and Research, Janus Henderson Investors, Mubadala, Nuveen and Permodalan Nasional Berhad; leading family groups from Indonesia including Djarum, the Sariaatmadja family and Sinar Mas also invested.
Shares of Altimeter Growth Corp rose 9.9 per cent to close at US$15.33 on Tuesday.
Grab's adjusted net revenue grew at an annual rate of 96 per cent from 2018 to US$1.6 billion in 2020. It is projecting to hit US$4.5 billion by 2023 in net adjusted revenue, which refers to gross billings less base incentives given to merchants and drivers.
Ebitda (earnings before interest, tax, depreciation and amortisation) loss was US$0.8 billion in 2020, narrowing from US$2.3 billion in 2019. Grab is projecting a positive Ebitda of US$0.5 billion by 2023.
The company said it achieved positive segment Ebitda in mobility across all markets, and positive segment Ebitda in deliveries in five out of six countries.
In 2020, the company posted gross merchandise value (GMV) of US$12.5 billion, surpassing pre-pandemic levels and more than doubling from 2018. According to Euromonitor, Grab's core verticals accounted for 72 per cent of total regional GMV for ride hailing, 50 per cent of total regional GMV for online food delivery and 23 per cent of regional total payment value for digital wallet payments in 2020.
Grab said that across online food delivery, ride hailing and digital wallet payments, it expects its total addressable market to grow from about US$52 billion in 2020 to more than US$180 billion by 2025.
The proposed transactions for the SPAC deal have been approved by the boards of directors of both Grab and Altimeter Growth. They are expected to close in July 2021, subject to shareholder approvals and other customary closing conditions.
Post-merger, the combined company will have its securities traded on Nasdaq under the symbol "GRAB".
Evercore acted as lead financial adviser to Grab, while JP Morgan and Morgan Stanley Asia (Singapore) were co-advisers. JP Morgan and Morgan Stanley & Co acted as lead placement agents, with Evercore and UBS as co-placement agents to Altimeter Growth on the PIPE deal.
Anthony Tan, chief executive and co-founder of Grab, said: "It gives us immense pride to represent South-east Asia in the global public markets. This is a milestone in our journey to open up access for everyone to benefit from the digital economy."
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