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Indonesia’s two most valuable startups are targeting a valuation of between US$35 billion and US$40 billion. This could create a powerhouse that might become one of South-east Asia’s fastest-growing Internet companies – along with the likes of gaming and e-commerce giant Sea Ltd.
A marriage between the two home-grown unicorns not only looks good for Indonesia’s digital economy it might prove more sensible and complementary as compared to a Grab-Gojek deal.
With talks of a Gojek-Tokopedia merger firming up, industry sentiment is unanimous to the belief that the tie-up would be beneficial for both firms, considering that natural synergies can help strengthen the two parties.
For example, Tokopedia’s e-commerce business could work with Gojek’s last-mile delivery fleet. Financial services could also be a focus, as Tokopedia’s “pay later” schemes could also be integrated with the services of GoPay and Bank Jago, a digital bank backed by Gojek.
Furthermore, Gojek can leverage Tokopedia’s data points to expand its reach within Indonesia.
Justin Tang, United First Partners’ head of Asian Research, said: “The merger would see the new entity become an all-in-one platform to consumers – there will be very (little), if any, leakage of revenue. Additionally, the two could begin to cross-sell into the different pool of customers and increase user stickiness.”
Besides obvious synergies, industry sources reckon the Gojek-Tokopedia union could even be healthy for the startup ecosystem in Indonesia.
Patrick Yip, the co-founder of Jakarta-based Intudo Ventures, told BT: “With a combined value of US$18 billion, it makes them a very credible acquirer of younger startups, which gives them a better chance of being successful.”
Mr Yip noted that Pandu Sjahrir – who was appointed a commissioner of the Indonesia Stock Exchange for the 2020-2023 period to help Indonesian tech startups go public – also sits on the board of Gojek.
The Gojek-Tokopedia merger could face little resistance from regulators, given their distinct businesses. Previously, talks of a Grab-Gojek union drew anti-competition sentiment from regulators as well as backlash from Indonesian motorbike drivers who feared for their jobs.
On the other hand, Indonesian regulators are more comfortable with the idea of merging Gojek and Tokopedia, given that both firms are Indonesian and would therefore be seen as nationalistic, industry sources told BT in January.
Mr Tang of United First Partners said: “It is smart from an integration point of view. With both companies being Indonesian, post-merger integration will be significantly less complex than a deal with Grab.”
Joel Shen, a lawyer at Withersworldwide, added: “Importantly, Tokopedia does not have an e-money licence issued by the Indonesian central bank (BI), which means that a Gojek and Tokopedia merger would be able to proceed without prior approval from BI.”
The latest terms under discussion call for Gojek shareholders to own about 60 per cent of the combined entity while Tokopedia’s investors hold 40 per cent, according to Bloomberg.
Both companies are reportedly approaching the transaction as a merger of equals. This is quite unlike the Grab-Gojek deal, where neither company wanted to concede to being the smaller party in a merger.
Unlike Grab and Gojek, which have a history of hostility, Tokopedia and Gojek’s founders have been friends since their inception. The companies already partner for logistics and payments services.
Investors have been said to be pushing their portfolio companies to go public, inspired by the ample liquidity in stock markets. The high cash burn from Internet companies in South-east Asia might also be a sore point for investors, with a growing focus on profitability.
Both founded in 2009, neither Gojek nor Tokopedia are profitable. But they count some of the world’s biggest technology groups as investors including Google, Facebook, Microsoft and PayPal as well as China’s Alibaba, Tencent and Meituan.
The two Indonesian tech pioneers have common investors, including Google, Temasek Holdings and Sequoia Capital India. Masayoshi Son’s Softbank group, an investor in Tokopedia, has also put his weight behind the deal, giving it extra heft.
Its potential merger with Gojek will give the e-commerce platform additional gunpowder to take on its rivals, observers told BT. For Gojek, the merger provides a path to future profitability and an opportunity for its investors to cash out.
Edward Chamdani, managing partner of Ideosource Venture Capital, said: “If the merger leads to an IPO (initial public offering), it will be able to attract a much larger investment pool. The US$18 billion valuation could easily grow 10-fold in the near future.”
Although huge in Indonesia, both companies have had trouble expanding out of their home turf. They could face increased competition from regional players like New York-listed Sea and Singapore-based Grab, who have been aggressively expanding their presence across South-east Asia.
Wither’s Mr Shen noted that both (Gojek and Tokopedia) are “dyed-in-the-wool Indonesian companies”, with either no ambition to expand beyond Indonesia, as is the case with Tokopedia, or an inconsistent overseas track record, as is the case with Gojek.
“It would take a lot for Gojek and Tokopedia to rival a regional player like Sea,” Mr Shen said.
Li Jianggan, founder and chief executive of Momentum Works, is bearish on the prowess of a Gojek-Tokopedia merger against Singapore-based Sea. He believes that it may not change anything in the competitive landscape: Gojek is still defending its turf against Grab and Sea’s e-commerce arm Shopee is moving ahead of Tokopedia.
“Grab has a regional leadership and Sea has a profitable gaming business, which neither Tokopedia nor Gojek has,” he said.
Mr Shen noted: “Gojek and Tokopedia may run the risk of spreading themselves too thin across too many battle fronts. In order for the merger to succeed, they would have to develop and implement a cohesive post-merger strategy, which will need to be funded”.
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