Indonesian ride-hailing and payments firm Gojek and e-commerce leader Tokopedia announced a multi-billion dollar merger of their businesses on Monday (May 17), creating a technology powerhouse called GoTo Group in the country’s largest-ever deal.
The combined entity, which will span online shopping, courier services, ride-hailing, food delivery and other services in Southeast Asia’s largest economy, will be the biggest privately held technology company in Southeast Asia.
It plans to list in Indonesia and the United States later this year, company executives said. In a joint statement on Monday, the companies said their combined past valuation was US$18 billion based on fundraisings done in 2019 and early 2020.
The merger of Gojek and Tokopedia – each backed by global heavyweight investors – comes amid a surge of competition in the ride-hailing and food delivery markets in Southeast Asia.
Last month, Southeast Asia’s largest ride-hailing and food delivery firm Grab clinched a $40 billion merger with a special purpose acquisition company and Singapore-based regional internet firm Sea Ltd, which runs e-commerce platform Shopee, is also muscling into food delivery and financial services.
GoTo’s biggest investors will include Alibaba Group Holding , SoftBank Group Corp, Singapore sovereign wealth fund GIC, Alphabet’s Google and Tencent Holdings.
Sources said Gojek’s shareholders will own 58 per cent of the holding company with the balance held by Tokopedia’s investors.
“GoTo will be unique in its ability to cover two-thirds of Indonesian consumer expenditure”, Tokopedia President Patrick Cao told reporters. “If you look at our regional peers, they exceed only at covering one sector.” Cao will become the president of GoTo and Gojek CEO Andre Soelistyo will be chief executive.
GoTo’s deal came together quickly in December after months of negotiations between Gojek and Singapore-based Grab fell apart.
Gojek and Tokopedia’s executives have personal and family ties and have held discussions about a deal in 2018, sources told Reuters.
Using the model of Alphabet, Gojek and Tokopedia plan to remain separate but work together on payments, logistics and food deliveries.
While e-commerce is booming in Indonesia, with its digital economy expected to grow to US$124 billion by 2025, according to a 2020 study by Google, Temasek Holdings and Bain & Company, its 17,000 islands are spread across an area bigger than the European Union, making it extremely costly.
“GoTo will still need to face stiff competition from larger regional rivals Shopee and Grab, which are leading in market share in both e-commerce and food and which have their dominance in other parts of Southeast Asia to cushion the long term investment commitment into Indonesia,” said Jianggan Li, CEO of venture outfit Momentum Works.
Executives at GoTo are also betting on the merged group’s financial arm, which will own 22 per cent of Indonesian digital lender Bank Jago and include lending operations.
Of Indonesia’s population of 270 million, half lack bank accounts but most now have mobile phones.
Goldman Sachs is the financial advisor to Gojek, and Citi is the financial advisor to Tokopedia
Investors told Reuters the merger will herald a wave of listings for Indonesia, with e-commerce firm Bukalapac and travel app Traveloka expected to list later in 2021.
“This is the beginning of us proving how local startups can grow at scale and from Indonesia to the world”, said East Ventures founder Willson Cuaca, an early backer of Tokopedia and a shareholder in Gojek.