Grab, south-east Asia’s most valuable start-up, has agreed to the largest-ever merger with a special purpose acquisition company, raising $4.5bn in cash to go public in a US deal that will value its shares at close to $40bn.
Grab was founded in 2012 as the region’s answer to Uber and morphed into a superapp that provides everything from food delivery to digital payments. It will combine with a New York-listed Spac launched by Altimeter, a Silicon Valley firm known for its backing of late-stage technology companies.
The deal, which marks a significant moment for south-east Asian start-ups as well as the booming market for Spacs, shatters the record for the largest-ever merger by a blank-cheque vehicle as hundreds of competing entities search for private targets.
Bankers and other participants in Spac transactions meanwhile warn that the market has overheated, as sources of fresh capital to back mergers dry up and US securities regulators scrutinise Spacs and their deals more closely.
Anthony Tan, Grab’s chief executive and co-founder, called the deal a “milestone”.
“It gives us immense pride to represent south-east Asia in the global public markets,” Tan said in a statement. “This is a milestone in our journey to open up access for everyone to benefit from the digital economy.”
In addition to approximately $450m in proceeds from the Altimeter Growth Corp Spac, Grab will raise more than $4bn in fresh funding, which will be led by a $750m cash injection from Altimeter.
Other funds investing in the deal include BlackRock, T Rowe Price, Fidelity, Janus Henderson, Abu Dhabi’s Mubadala, Singapore’s Temasek as well as a number of wealthy Indonesian family offices.
Grab, which is not yet profitable, has grown strongly during the pandemic. The Singapore-headquartered group reported a gross merchandise value — a metric measuring total sales transactions on its platform — of $12.5bn in 2020, surpassing pre-pandemic levels and more than doubling from 2018. Its ride-hailing business breaks even in all of its markets but its financial and deliveries arms are not yet profitable.
Credit rating agencies Moody’s and S&P this year assigned their first ratings on Grab. Moody’s does not expect the company to break even until 2023 due to its cash burn.
Brad Gerstner, Altimeter’s founder and chief executive, said Grab was “paving a digital path” for south-east Asia’s 670m people. He noted that online penetration for the services Grab offered was well below that of the US, despite its larger population.
“Grab expects its total addressable market to grow to $180bn by 2025, compared to $52bn in 2020,” Gerstner said.