On Tuesday, Southeast Asia's Grab, a "super app" providing a one-stop shop for ride-hailing, food delivery, online banking and more across eight countries in the region, announced that it has struck a deal to go public via special purpose acquisition company Altimeter Growth Corp. (AGCUU, Financial). Following the SPAC merger, which values the company at $39.6 billion, the Softbank (TSE:9984, Financial) backed stock will trade on the Nasdaq under the "GRAB" ticker.
Shares of the SPAC jumped about 8% to $16.14 on Tuesday before retreating to below $14 again throughout the rest of the week.
About the companies
Grab, which was ranked 16th on last year's CNBC Disruptor 50 list, started out as a ride-sharing service in 2012 and has grown to offer its customers a "super app" where they can access a wide range of digital services in the same place, such as transportation services, booking lodging, online banking, mobile bill payments and even insurance. Customers are able to benefit from the convenience of only needing to access a single app for these services, and Grab gets the benefit of each one of its services drawing customers for the rest of them.
"So, today as we announce what is expected to be the largest U.S. equity offering in Southeast Asia... it shows validation of the tremendous offering right here in this region, and that the 'super app' strategy works," Grab co-founder and CEO Anthony Tan said on Tuesday.
Meanwhile, Altimeter Growth is a SPAC sponsored by Altimeter Growth Holdings, a company whose stated purpose is to "help visionary entrepreneurs build iconic companies, disrupt markets and improve lives through all stages of growth." In addition to its SPAC offerings, the company also manages a vertically integrated capital markets platform that helps customers through their public offering process, whether it be a SPAC, initial public offering or direct listing.
Taking advantage of rapid digitalization
Like its peers in the ride-sharing business, Grab has seen declines in this part of its business. However, in January, the company reported that its ride-sharing services were breaking even in all operating markets, including Indonesia, its largest market. The company's overall revenue had also grown 70% year over year at the time, nearly recovering to pre-pandemic levels on strength in food delivery and other parts of its business.
"Even in the toughest times during Covid, we've been able to pivot our driver supply to other jobs," Tan noted. "There's no one country that makes up more than 35% of our total revenues, so having that resilience and regional diversification has really helped us."
In other words, Grab's diversification across businesses and markets has served as a key advantage, helping to stabilize the company so that it is not overly dependent on one revenue source.
Concentrating a diverse range of app-based services in one place could also be playing a key role in helping the company grow its customer base. According to a report from Alphabet's Google (GOOG, Financial)(GOOGL, Financial), Temasek Holdings and Bain & Company, 40 million people in six Southeast Asian nations - Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand – came online for the first time in 2020. In an environment of rapid digitalization, many customers will be looking for the easiest, most convenient way to access the digital services they need, and that is exactly what Grab's "super app" seeks to provide.
The terms of the deal
Altimeter Growth's deal for Grab values the company at $39.6 billion, which would make it the largest SPAC merger to date. Grab will receive $4.5 billion in cash as part of the deal, including $4 billion in a private investment in public equity arrangement. This PIPE seems to be one of the main reasons why the company decided to go the SPAC route, according to Tan:
"We found this was the better way to IPO… They [Altimeter] committed more than 15% of our PIPE, and that shows real commitment... we've been able to secure a world-class, day-one cap table of all investors."
Though it is still pending shareholder approval, the deal could be finalized within the next few weeks, according to the companies. Investors who are interested in technology growth may want to keep an eye out for more news on the deal, especially given the additional upside opportunity from a greater percentage of Southeast Asian consumers coming online.
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