Gojek, Tokopedia merger: What’s the latest?

• Indonesian ride-hailing app Gojek and e-commerce platform Tokopedia are pursuing a merger and future listing
• Their potential synergies lie in delivery, e-commerce and fintech
• The tech pioneers’ combined entity could face intense competition from other regional players
• Analysts believe the deal is likely to be supported by the Indonesian government
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What are the key details?

Indonesia’s two most valuable startups, ride-hailing and payments behemoth Gojek and e-commerce pioneer Tokopedia, are in advanced talks to amalgamate in a US$18 billion deal, Reuters reported this month.

The parties signed a term sheet to conduct due diligence, and hope to close the transaction ‘as soon as possible’ in the coming months, said Bloomberg.

If the merger is successful, the combined entity may also head for a dual listing in the United States and Indonesia. Merger ratios are still under discussion.

Gojek and Tokopedia’s plans to go public in the United States would offer investors an alternative to Sea, which is thus far the only major Southeast Asian internet firm listed there, Bloomberg wrote.

Rival ride-hailing and food delivery group Grab is also reportedly some time this year, according to a Reuters report published earlier this week.

Both GoJek and Tokopedia are eyeing a few options to get listed, including a traditional IPO in Indonesia and the US, or the speedier reverse-merger route in the US with a blank-cheque company, also known as a special purpose acquisition company (SPAC).

Media reports pegged Gojek’s value at US$10.5 billion, while Tokopedia was believed to be worth US$7.5 billion.

They have common investors such as Temasek, Sequoia Capital and Google. Tokopedia’s backers also include SoftBank’s Vision Fund and Alibaba Group.

Why are Gojek and Tokopedia merging?

Market observers commented that the merger would offer an attractive proposition given the mix of distinct businesses of both firms, The Business Times (BT) reported. Their businesses range from ride-hailing and payments to e-commerce and delivery.

Gojek and Tokopedia have potential synergies to create an all-in-one digital powerhouse in Indonesia. For example, Gojek’s delivery fleet could serve Tokopedia’s online shopping orders, while Gojek can use the latter’s data points to broaden its reach in the country, BT wrote.

Another key area of overlap is in digital payments, where Gojek’s GoPay and Tokopedia’s e-wallet OVO compete head-on. It is possible Tokopedia may sell its 35% stake in OVO, wrote CrossASEAN Research analyst Angus Mackintosh, who publishes on Smartkarma.

The combined entity will be a huge enabler for micro, small and medium enterprises, and the merger is unlikely to cause substantial job losses as both parties operate in different verticals, Mackintosh added. He thus believes the deal could get significant support from the Indonesian government.

What are the possible challenges?

However, the new entity could face fierce competition from regional player Sea Limited (NYSE: SE), BT said, citing industry watchers. Singapore-based Sea owns online marketplace Shopee, gaming arm Garena and digital financial services division SeaMoney.

LightStream Research’s Shifara Samsudeen noted that Tokopedia has been struggling with increased rivalry from Shopee and Lazada.

Shopee has rapidly grown its Indonesian business using a vertically integrated business model and aggressive marketing, Samsudeen wrote on Smartkarma. An iPrice Indonesia report stated Tokopedia was the country’s most visited e-commerce website in 2019, before Shopee overtook it in 2020.

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