Indonesia's internet start-ups Gojek and Tokopedia announce merger

A Gojek driver checks his mobile phone in Jakarta, Indonesia on Jan. 5, 2021.

Dimas Ardian | Bloomberg | Getty Images

Indonesia ride-hailing and payments firm Gojek on Monday announced its merger with e-commerce player Tokopedia to form the GoTo Group.

Without disclosing the value of the transaction, Gojek claimed the agreement marked the largest business deal in the country’s history. It pointed to a combined past valuation of $18 billion based on fundraising rounds from Gojek that was priced in 2019 and Tokopedia priced in 2020.

The ultimate goal is an IPO with a public market valuation target of between $35 billion and $40 billion, Bloomberg reported in February.

“We are considering the IPO, accelerated timeline for IPO, and that will be a market discovery. So we do think that the valuation as a combined company, given the synergies and whatnot, will be higher than $18 billion,” Andre Soelistyo, who is group CEO of the new company, told CNBC’s “Squawk Box Asia” on Tuesday.

“But what the number will be, it depends on the process that we are going to go through in the next few months or so,” said Soelistyo, who will also lead GoTo Financial — the rebranded unit for payments and financial services.

Tokopedia’s Patrick Cao will be group president of GoTo Group. Kevin Aluwi will remain CEO of Gojek and William Tanuwijaya will continue to lead Tokopedia.

Competitive landscape

The merger will likely help Gojek and Tokopedia to take on larger, regional rivals such as Singapore-headquartered Grab and internet company Sea, which operates e-commerce platform Shopee and has a digital payments and financial services business. Sea has a market value of more than $112 billion.

Last month, Grab announced a nearly $40 billion SPAC merger to go public on the Nasdaq.

Soelistyo told CNBC the immediate goal for GoTo Group is to improve product experience for customers, drivers and merchants in Indonesia.

To do so, they will create new technologies that can be exported to other markets. A lot of the “ecosystem creation that we are doing in Indonesia would be presented in international markets, so, it’s a question (of) when, not an if,” he said.

GoTo Group will combine e-commerce, on-demand and financial services from Gojek and Tokopedia. In 2020, their combined transactions were more than 1.8 billion and their total gross transaction value was over $22 billion. The companies together have more than 100 million monthly active users.

“Our business model is now even more diverse, stable and sustainable,” Cao, president of the GoTo Group, said in a statement on Monday. “We have Gojek’s high volume, high frequency mobility transactions, combined with Tokopedia’s high value, medium frequency e-commerce transactions. GoTo Group will account for more than 2% of GDP in Indonesia.”

Asked about the group’s path to profitability, Soelistyo told CNBC that parts of the business still require investments for growth and user acquisitions. But there are products that are generating “contribution margin as we call it, or EBITDA on a per product basis.”

EBITDA — a measure of overall financial health for a business — stands for earnings before interest, taxes, depreciation and amortization. It is a common earnings metric used by tech companies even though some investors are skeptical about it.

The GoTo Group has prominent backers who previously invested in Gojek or Tokopedia. They include Alibaba, Tencent, Sequoia Capital India and Singapore state investor Temasek.


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