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Gojek and Tokopedia seek investor approval to merge: sources

Move by Indonesian unicorns marks significant step toward finalization of deal

Indonesian startups Tokopedia and Gojek are seeking approval for a merger from their investors. (Source photos by Ken Kobayashi and Kosaku Mimura)

JAKARTA -- Gojek and Tokopedia, two of Indonesia's biggest tech companies, have written to their investors asking for approval to merge, Nikkei Asia has learned.

Both sent letters on Friday, according to three people familiar with the matter.

While the latest move does not mean they have agreed to a merger, it marks a significant step toward reaching a deal to create one of Southeast Asia's largest tech companies that would encompass ride-hailing, food delivery, payments and e-commerce.

According to the sources, both companies will look to finalize a merger a "few weeks after" getting sufficient shareholder approval. One source said top managers in both companies are "fully aligned" and in support of the merger. The source added that should shareholders approve, chances of the deal collapsing are very slim.

One investor said that they have received the letter and already approved the deal, adding, "100% approval is expected." Another investor also said they will support the merger.

"There is nothing we can share at this moment," Tokopedia's spokesperson said. "Should there be any corporate action, we will definitely inform the public accordingly." Gojek, meanwhile, declined to comment.

The companies' communication with the investors comes as the race to go public among the region's biggest startups intensifies, spurred by the need to fill up their respective war chests as they gear up to take on the region's biggest tech company, Sea, which is listed on the New York Stock Exchange.

Backed by its ability to tap the public markets, the Singaporean company has made aggressive inroads into areas such as e-commerce and food delivery by offering aggressive promotions, especially in Indonesia, the region's biggest economy.

The Financial Times reported this week that Singapore-based Grab, Gojek's rival and Southeast Asia's most valuable startup, is close to finalizing an agreement to list in New York via one of Altimeter Capital's special purpose acquisition companies, or SPACs, in a deal that would value the SoftBank-backed company at around $35 billion.

And Bloomberg reported on Friday that Indonesia's Traveloka, a unicorn, or private company valued at over $1 billion, is in advanced talks to go public through a merger with Bridgetown Holdings, a SPAC backed by billionaires Richard Li and Peter Thiel, in a deal which would value the online travel agent at around $5 billion.

Gojek and Tokopedia, valued at around $10 billion and $7 billion respectively, are also looking to list their combined entity in both the U.S. and their home market of Indonesia. Whether the companies, like Grab and Traveloka, use a SPAC or go for a traditional initial public offering is still being discussed, as is the timing.

Discussions are ongoing as to the shareholding of the merged entity, but one of the sources said it would "very much [be] a merger of equals" with the two companies continuing to "operate as before" under a holding company structure.

One of the sources said that when the combined entity goes public, it will be aiming for a valuation "similar or higher" to Grab's reported $35 billion valuation as the "Gojek-Tokopedia entity would have an e-commerce arm" which would be more appealing to potential investors by virtue of offering more diverse services compared with Grab.

Both companies count U.S. tech giant Google and Singapore's state investor Temasek among their shareholders. Other investors in Gojek include Facebook, which invested in the company's payment arm, global private equity company KKR as well as Indonesian conglomerate Astra International. Tokopedia's biggest shareholder is SoftBank, followed by Chinese e-commerce giant Alibaba.

Gojek initially held merger discussions with Grab last year, but the deal collapsed as both companies could not reach agreement on the shareholding ratio of a combined entity.

A merger between Gojek and Tokopedia will face less regulatory scrutiny than a Gojek-Grab merger, as their business overlaps are limited. However, another person familiar with the matter said the payments segment might come under scrutiny, as Tokopedia is a major shareholder in digital payment service OVO, while Gojek operates GoPay. Both are two of the largest digital payments services in Indonesia.

Thus, there is a risk that regulators will take a close look at a Gojek-Tokopedia deal if it is seen creating a monopoly in Indonesia's payments market.

"Both companies will need to figure out what they want to do with their payment service," the person said.

Additional reporting by Wataru Suzuki in Tokyo

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