Grab’s GoTo takeover bid: a step too far for Indonesia?

As Singapore-based Grab reportedly eyes Indonesia’s prized GoTo in a potential US$7 billion deal, analysts predict a nationalist backlash

As speculation mounts over a potential acquisition of Indonesian consumer tech giant GoTo by Singapore-based Grab, analysts warn the deal could face opposition in Indonesia over foreign ownership concerns and the regional clout of the potential owner.

The reported deal would value GoTo at around US$7 billion, according to a Reuters report on May 7, citing two unnamed sources familiar with the matter. The proposal reportedly involves Grab acquiring GoTo’s international unit and most of its domestic business – excluding its finance arm.

If the deal is confirmed, it could be finalised as early as the second quarter, heralding a major consolidation in Southeast Asia’s e-commerce space, which is led by Grab’s US-listed platform that spans ride-hailing, food delivery, digital payments and financial services.

News of the potential merger buoyed investor confidence. Shares of Jakarta-listed GoTo have surged 20 per cent since the start of the year, reaching a market value of roughly US$5.8 billion as of May 7, according to London Stock Exchange data.

Grab’s shares on Nasdaq also climbed 2.4 per cent over the same period, valuing the company at nearly US$20 billion.

However, Grab Indonesia on Thursday dismissed speculation about the merger, saying it was “not based on verified information”.

GoTo, for its part, has confirmed it is evaluating multiple offers from interested parties. Chief Executive Officer Patrick Walujo has repeatedly emphasised in recent months his openness to deals that could boost investor returns.

Neither company responded to This Week in Asia’s requests for comment.

If it materialises, a Grab-GoTo merger would create a regional juggernaut, commanding about 85 per cent of Southeast Asia’s digital services market, which is estimated to be worth US$8 billion, according to data analytics firm Euromonitor International.

But such dominance would undoubtedly invite regulatory scrutiny. Analysts warn that a merger of two of the region’s largest players in ride-hailing and food delivery could raise antitrust concerns.

The two companies currently control 70 to 90 per cent of Indonesia’s on-demand services market, according to Josua Pardede, chief economist at Permata Bank in Indonesia.

“A Grab-GoTo merger, if implemented, would be one of the most consequential consolidations in the Southeast Asian technology sector,” he said.

Pardede cautioned that regulatory hurdles could be “substantial”, with authorities likely to scrutinise the deal for potential monopolistic practices and consumer harm.

Foreign ownership concerns

GoTo was formed in 2021 through the merger of ride-hailing and on-demand services app Gojek and e-commerce platform Tokopedia. It debuted on the Indonesian Stock Exchange in 2022 with a US$32 billion valuation, backed by global heavyweights like SoftBank and Alibaba, owner of the South China Morning Post.

But intense competition has eroded its margins, and its share price has plummeted since its initial public offering. In response, GoTo has scaled back operations, exiting Vietnam and selling a controlling stake in Tokopedia to TikTok for US$1.5 billion. CEO Patrick Walujo defended the move in February last year, describing the sale as essential to Tokopedia’s growth in a challenging market.

Grab has also faced challenges. Since its US$40 billion Nasdaq listing in 2021, its market value has dropped by two-thirds. However, the company posted a net profit of US$24 million in the first quarter of this year, a sharp turnaround from its US$104 million loss during the same period in 2022, thanks to a cost-cutting drive.

Any merger between GoTo and Grab would likely reignite nationalist concerns about foreign ownership. Analysts argue that positioning the deal as a strategic partnership, rather than a takeover, could help assuage public and governmental anxieties.

The merger would establish Grab as the “default superapp in Indonesia and beyond”, consolidating its dominance through GoTo and expanding its reach into the fintech and e-commerce sectors, Josua said.

“A foreign acquisition of one of Indonesia’s flagship digital economy players – particularly one with extensive local employment and MSME [micro, small and medium enterprises] partnerships – could potentially result in nationalist backlash unless it is carefully framed as a strategic partnership rather than a takeover,” he added.

James Guild, a trade expert and adjunct fellow at the S. Rajaratnam School of International Studies in Singapore, expressed doubt about the Grab-GoTo merger taking place in an article for The Diplomat published in April.

Such an outcome would reduce competition for ride-hailing and food delivery services in the region and engender opposition in Indonesia as GoTo was viewed as an “important national project”, he said.

“Even if it never turns a profit, GoTo serves a very useful function in the Indonesian economy by boosting consumption and allowing small businesses to increase sales,” Guild added.

“At some point, the logic of such a merger will run up against the fact that the Indonesian government probably does not want to see GoTo owned by a foreign company.”