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South China Morning Post

Singapore’s Grab to go public at US$40 billion valuation amid SPAC frenzy

Grab Holdings, Southeast Asia’s most valuable tech unicorn, said it would go public via a US-listed special purpose acquisition company (SPAC) in a deal that would value the company at about US$39.6 billion. The Singapore ride-hailing and food-delivery giant would merge with Altimeter Growth, an investment vehicle backed by Silicon Valley’s Altimeter Capital Management, and go public with a listing on the Nasdaq stock exchange. As part of the deal, investors have agreed to provide more than US$4 billion in so-called private investment in public equity (PIPE) financing. Grab will receive up to US$4.5 billion in cash from the overall transaction. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team. “We have sizeable and real profit centres now within the business. The way that we think about [a US listing] is it is a natural evolution as we get more and more mature,” Ming Maa, Grab’s president, told the Post. The US listing “would be the next stage to access a different set of investors.” Altimeter Capital Management has committed US$750 million to the PIPE financing. Other investors include the world’s largest asset manager Blackrock, a Morgan Stanley fund, Counterpoint Global, T. Rowe Price, Fidelity International, Fidelity Management and Research, Janus Henderson Investors, Emirati state-owned Mubadala Investment Company, Singapore’s Temasek Holdings and investment manager Nuveen. Advisers on the deal include Evercore, JP Morgan, Morgan Stanley and UBS. Founded in 2012, Grab has grown from a college project first envisioned by its Malaysian co-founders Anthony Tan and Tan Hooi Ling while at Harvard Business School to a super app that offers services from ride-hailing to financial services in eight markets across Southeast Asia. The company is still unprofitable, with Moody’s Investors Service saying Grab is unlikely to break even on a consolidated earnings before income tax, depreciation and amortisation (Ebitda) basis before 2023. “We expect the company to incur sizeable operating losses and cash burn (cash flow from operations less capital spending) over the next two to three years, which will be driven by intense competition in the food delivery business and investments in its nascent digital financial services business,” Moody’s analyst Stephanie Cheong said in a January 25 credit opinion. Grab said in January that revenues rose 70 per cent in 2020, with its ride-hailing business breaking even in all of its eight markets, including its largest, Indonesia, where it faces stiff competition from rival Gojek. Grab also cut its monthly Ebitda spending by 80 per cent last year as passenger traffic ground to a halt amid lockdowns designed to contain the coronavirus pandemic. “While we had already entered new business verticals like deliveries, we had to pivot quickly at scale to support our communities in their time of need,” said Grab’s Maa in January newsletter with a subject line “turning the corner”. Grab’s driver centre in Singapore. The company said in January that its ride-hailing business broke even in all markets in 2020. Photo: SCMP alt=Grab’s driver centre in Singapore. The company said in January that its ride-hailing business broke even in all markets in 2020. Photo: SCMP> Management’s quick reactions meant not only did the group’s business stabilise during the crisis, it continued to grow. Grab has added nearly 600,000 new merchants to its platform over the past year and tripled net revenues at its food delivery business in the third quarter. The company said it expected food delivery operations to break even by the end of this year. A key measure of online retailing, gross merchandise value (GMV), hit US$12.5 billion in 2020, higher than Grab’s pre-pandemic level and more than double its 2018 amount. Grab commanded 72 per cent of regional ride-hailing GMV in 2020, half of the region’s food delivery GMV and 23 per cent of total payment value (TPV) for digital wallet payments, according to market researcher Euromonitor. Grab’s roughly US$40 billion valuation is a significant step up from where the unicorn was valued in private markets at US$16 billion post-money last year. The valuation is based on pro forma equity. Grab has raised more than US$12 million since 2014 from investors, including GGV Capital, K3 Ventures, Mitsubishi UFJ Financial Group and SoftBank Group’s Vision Fund. There are more than 70 million small and medium sized enterprises in Southeast Asia, which account for 99 per cent of all businesses in the region, according to Grab. “This is testament to the global investment community’s belief in the long-term value proposition of Grab’s superapp strategy and the exciting growth potential of Southeast Asia,” Anthony Tan, Grab’s CEO and co-founder, said in a statement. The SGX, which considered allowing SPACs to list over a decade ago, has proposed a minimum market capitalisation of S$300 million (US$224 million/HK$1.7 billion) to list on its mainboard – a higher minimum threshold for listings than required in New York – and said it would enact a variety of rules designed to safeguard investors, including requiring sponsors to hold an interest in the SPAC for longer after a merger. The Securities Futures Commission and Hong Kong Exchanges & Clearing (HKEX) are expected to complete their own review for potential SPAC listings within the next few months and any rule changes would include sufficient investor protection measures, according to a government source, who was not authorised to discuss the matter publicly. This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.



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