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SoftBank and Alibaba take top stakes in Indonesia's GoTo

Merged digital startups Gojek and Tokopedia aim to go public by end of year

GoTo, which merges Indonesian unicorns Gojek and Tokopedia, has Japan's SoftBank and China's Alibaba as major investors. (Source photos by AP and GoTo Group)

JAKARTA -- Japan's SoftBank and China's Alibaba are positioned to capitalize on any gains from the merger of Indonesia's top tech unicorns Gojek and Tokopedia after becoming the two biggest shareholders in the newly formed GoTo Group.

Gojek, a "super app" for ride-hailing, financial and other services, and e-commerce-focused Tokopedia announced on Monday they are uniting under a holding company.

The deal swaps Tokopedia shareholders' stock in the e-commerce company for newly issued Gojek shares. They will join Gojek shareholders under Aplikasi Karya Anak Bangsa, Gojek's registered entity.

GoTo's filing with authorities on Monday showed that after the merger Gojek shareholders now hold around 58% of GoTo, while Tokopedia's have 42%.

But telecommunications and investment giant SoftBank Group, a major investor in Tokopedia, scored the largest single shareholding in the merged company at 15.3%, followed by e-commerce conglomerate Alibaba Group Holding, also a Tokopedia investor, at 12.6%, the documents show.

They are the only investors with double-digit stakes, outstripping others such as Google and Singapore government investment fund Temasek, which each had stakes in both Gojek and Tokopedia.

SoftBank and Alibaba's big shareholdings will not necessarily translate into significant control over the merged entity, as different voting rights are ascribed to different shares. However, they could bring a financial windfall when GoTo goes public, as it says it intends to by the end of the year.

SoftBank holds its shares in GoTo through various vehicles, including its marquee Vision Fund. Gains from some of the companies in its portfolio that went public, including South Korea's Coupang and U.S. food delivery company DoorDash, propelled the Japanese group to a record net profit of 4.99 trillion yen ($45.8 billion) for the year ended March.

Alibaba, meanwhile, said last week that it swung to a net loss of 5.5 billion yuan ($850 million) in the January to March quarter after it was fined a record 18 billion yuan by the Chinese government for anticompetitive practices.

Vision Fund-backed Grab, Gojek's Singapore-based rival, also plans to go public via a record $40 billion deal using a special purpose acquisition company, or SPAC.

GoTo hopes to go public through a dual listing in the U.S. and Indonesia, shooting for a valuation close to the $40 billion that Grab achieved. A person close to the matter said it will likely list in Indonesia first, but did not give a reason.

"These are big companies with large employee bases and sophisticated, very complex operations, so there is a lot of integration work to do prior to addressing the public markets," the person said. "The company will be working very hard on post-merger integration, and then preparation for these two listings [in the U.S. and Indonesia]. They have a busy year ahead. I'm very hopeful that this is a 2021 event, but they have a lot of work."

The person expects a "traditional listing," for GoTo rather than it using a SPAC.

But should GoTo decide to take the same route as Grab, it may be able to enlist the help of its third-largest shareholder, Radiant, which is potentially linked to Hong Kong billionaire Richard Li.

Radiant, under three different entities, now holds 4.7% in GoTo after the merger, having been a major shareholder in Tokopedia. All entities share the same Hong Kong address in the GoTo filing.

The address, in a similar filing with regulators by Tokopedia before the merger, was listed alongside Li, who was one of the commissioners at the e-commerce giant. In Indonesia, a board of commissioners supervises the board of directors.

Before the merger talks, Tokopedia had discussions with Bridgetown, a SPAC backed by Li and prominent Silicon Valley investor Peter Thiel.

Representatives for Bridgetown on Thursday declined to comment on the discussions. Those for Li had no immediate comment.

The Gojek-Tokopedia merger must still clear some regulatory hurdles, most likely surrounding their payment businesses. Tokopedia is a major shareholder in digital payment service OVO, while Gojek operates GoPay. Both are two of the largest such services in Indonesia, and that has raised fears of market dominance resulting from the merger.

Patrick Cao, president of GoTo, said on Monday the company will explore options to comply with regulations, including divesting Tokopedia's shares in OVO.

"If GoTo jettisons its interest in OVO quickly, regulatory approval could come soon, and a SPAC merger or listing will occur before the end of the year," Swarup Gupta, industry manager at The Economist Intelligence Unit, wrote in a memo.

But Gupta added: "I believe that the merger may have come too late, since it could be more a case of protecting one's home turf [of Indonesia] against significantly larger rivals [Sea and Grab], which could hamper efforts at growing across [Southeast Asia].

"Therefore, the merger looks more like a defensive measure at this point," he said.

Additional reporting by Wataru Suzuki in Tokyo and Michelle Chan in Hong Kong.

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