Gojek, Tokopedia near merger ahead of public listing

Jakarta

INDONESIA'S two most valuable startups, ride-hailing giant Gojek and e-commerce provider Tokopedia, are finalising the terms for their merger and aiming to reach an agreement as early as this month, said sources.

The two companies are discussing a variety of scenarios with the goal of ultimately listing the combined entity in both Jakarta and the US, they said. They spoke on condition of anonymity because the negotiations are private.

The target valuation in the public markets is between US$35 billion and US$40 billion, one of them said.

Representatives of Gojek and Tokopedia declined to comment.

The two startups plan to create an Indonesia Internet powerhouse on 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.

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The latest terms under discussion call for Gojek shareholders to own about 60 per cent of the combined entity; Tokopedia's investors will hold 40 per cent, said the sources. 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 US.

Another scenario is to list Tokopedia in Jakarta first, then merge with Gojek before a listing of the combined entity in the US.

The companies have yet to decide whether they would opt to list in the US via a traditional initial public offering (IPO) or a special-purpose acquisition company.

The talks are ongoing and it is possible they may 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, because it would have combined the two major providers of on-demand rides and delivery services in several South-east Asian markets.

SoftBank Group Corp founder Masayoshi Son, the biggest external shareholder in Grab, had originally encouraged Grab chief executive officer Anthony Tan to work out a deal with Gojek. But Mr Son has since shifted his support to a Gojek-Tokopedia alliance.

The two Indonesian tech pioneers have common investors, including Google, Temasek Holdings 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 South-east Asian internet company listed in the US, climbed almost 400 per cent last year, boosted by the growing popularity of its mobile gaming and online shopping platform.

Tokopedia is also backed by Alibaba Group Holding Ltd, which has Lazada, its own e-commerce unit in the region.

Grab has since picked banks for a potential US IPO that could raise at least US$2 billion, the sources have said. BLOOMBERG