The companies are in preliminary discussions and are exploring various scenarios for a potential merger, Bloomberg reported Friday (Feb. 9), citing unnamed sources. However, the discussions have been on and off, and may not result in a deal.
A GoTo spokesperson denied the report, telling Bloomberg that “no such discussion is taking place.”
Grab did not comment in the report and did not immediately reply to PYMNTS’ request for comment.
The talks have been driven by major shareholders of both companies who support a deal, according to the report. The potential merger aims to address the years of losses both companies have faced due to intense competition.
Key hurdles need to be addressed, however, including valuation, deal structure and governance, the report said. GoTo’s shares have dropped by about 30% in the past year, which adds to the complexity of the negotiations.
A merger between Grab and GoTo could have significant implications for the ride-hailing and food delivery markets in Southeast Asia, per the report. With tens of millions of ride-hailing users each, the combined entity could potentially raise rates and find synergies in markets where competition has kept prices low.
Additionally, the increased size of the merged company could strengthen its position in higher-margin services like digital payments and banking, the report said.
However, a merger of this scale would face intense scrutiny from regulators, as Grab and GoTo are already the dominant players in countries like Indonesia and Singapore, according to the report. The exit of Uber from the region after selling its Southeast Asian business to Grab in 2018 further solidified their market position.
The companies are aware of these concerns and are considering solutions to address them, the report said.
This is not the first time Grab and GoTo have explored a potential merger, per the report. This time around, discussions have been reignited after GoTo relinquished control of its eCommerce unit, Tokopedia, to ByteDance’s TikTok in December. This move has made Grab and GoTo more compatible and potentially stronger as a combined entity.
Grab said in August that it sees long-term growth prospects in the region, with Grab Group CEO and Co-founder Anthony Tan saying during an earnings call that there is room to grow beyond the users, drivers and merchants that are already on its platform in Southeast Asia.
During the same month, GoTo said it had cut its losses by more than half, with GoTo Group CEO Patrick Walujo saying during an earnings call that the company has built a strong presence among “convenience consumers” and plans to expand its customer base.