Grab heads for world’s biggest SPAC deal, may also list in Singapore

• Grab Holdings intends to list its shares on Nasdaq through a SPAC merger
• It will be valued at US$39.6 billion after the proposed deal, set to close this July
• A secondary listing on SGX is also possible, Reuters said
• Deliveries could be the major growth driver for Grab by 2023

SPAC merger: What are the highlights?

Singapore-based Grab plans to go public in the US via a merger with special purpose acquisition company (SPAC) Altimeter Growth Corp (Nasdaq: AGC).

The transaction, slated to close in July 2021, will value the ride-hailing giant at almost US$40 billion, more than double its valuation of over US$16 billion in 2020.

This is set to be the world’s largest SPAC deal ever, Reuters reported.

The combined entity’s securities will trade under the ‘GRAB’ ticker symbol on Nasdaq.

Anthony Tan, Grab’s CEO, will control 60.4% of the company’s voting power following the deal, The Business Times (BT) reported.

Shares of Altimeter Growth finished 9.9% higher last Tuesday (13 April 2021) at US$15.33 following the announcement, although they lost 18.3% over the next few days to close at US$12.52 on Friday (16 April 2021).

Why do credit analysts like the mega SPAC deal?

S&P Global said Grab’s ‘backdoor-style IPO’ and the expected US$4.5 billion cash proceeds will erase its refinancing risk in 2023, and support its cash burn.

Grab’s 2023 maturity wall comprises convertible redeemable preference shares, and the redemption rights of these bond holders will fall away with a public listing as they are converted into equity.

Moody’s Investors Service placed Grab’s ratings under review for upgrade. ‘Grab’s public listing will add US$4-4.5 billion of liquidity buffer upon completion, which will support the company’s growth plans,’ wrote Moody’s analyst Stephanie Cheong.

Will Grab list its shares in Singapore?

Grab is also mulling a secondary listing in its home market, Singapore, after it completes its Nasdaq debut via the Altimeter SPAC merger, Reuters reported.

Listing on the Singapore Exchange (SGX) will enable the company to have an investor base close to where its regional business is headquartered, sources told Reuters. That may thus offer its customers, drivers and merchants easier access to trade its shares.

If an issuer’s home markets are within the region, listing in Singapore can help it tap another pool of investors, as there are many family offices and funds based in the city-state, highlighted lawyer Raymond Tong from Rajah & Tann Singapore.

What will fuel Grab’s growth?

Grab operates in eight countries and nearly 400 cities. The ‘super app’ has businesses in deliveries, ride-hailing, and financial services.

Grab expects to achieve adjusted net revenue of US$4.5 billion in three years, and its food delivery business will make up about 49% of this amount.

The group anticipates that the largest percentage of revenue could come from deliveries by 2023.

It is also trying to diversify its financial services business, as payments revenue could be on a slump until FY2022. Grab, together with Singtel (SGX: Z74), won a digital-bank licence in Singapore last year.