While there have been numerous media reports in the past weeks of a potential merger between Grab and GoTo, Maybank Investment Bank opined that acquisition of Gojek would be the most favorable scenario for Grab, leading to maximum synergies while preserving balance sheet strength.

The research house said in a note on Thursday that if Grab acquires Gojek, it sees synergy net present value (NPV) of $2.4 billion, leading to 10 percent NPV accretion for Grab while balance sheet cash will still be a strong $3.2 billion.

According to Maybank, a Grab-Gojek merger and acquisition (M&A) is a likely scenario, with GoTo’s fintech and e-commerce businesses being excluded from the deal.

While Grab+Gojek will command 80 percent to 90 percent market share in Indonesia, it still sees the merger potentially going through as the market share of the mergedco as a percent of total surface transport will still be highly manageable at 23 percent.

Maybank also foresee Grab+Gojek merger synergies of $100 million to $200 million per year.

It argued that a cash deal was unlikely and opined a likely deal scenario would be: i) Grab acquires Gojek and in turn GoTo takes a minority stake in Grab (ala Grab-Uber deal); and ii) Grab and Gojek merge their on-demand services businesses and in turn take a stake in the unlisted consolidated entity (ala GoTo-TikTok Shop deal in
Indonesia).

According to the research house, both Grab and Gojek’s on-demand service (ODS) businesses are the most scaled and they are relatively mature in Indonesia, and as such offers opportunities to extract maximum and the most visible synergies.

It is noted that ODS competition intensifies from time to time, leading to higher spending on incentives, which in Maybank’s view could abate with potential consolidation.

Also, driver utilization levels would increase with the pooling of resources, allowing for lower driver incentives while consumer experience (like wait time) could be reduced, leading to lower consumer incentives.

Corporate costs like cloud spending and sales and marketing spending can be reduced substantially, according to the research house.

“Assuming post-merger, Grab+Gojek combined can increase the mergedco’s margins to 5.4 percent by FY27, we see an incremental earnings before interest, taxes, depreciation, and amortization (EBITDA) upside of $95 million to $205 million over FY26-27 versus our current assumptions,” it said.

Meanwhile, Gojek+fintech would be the second-best scenario, as it would help Grab’s financial services business to scale up faster besides opening new growth segments like Buy Now Pay Later (BNPL).

According to Maybank, GoTo’s fintech business is about 40 percent bigger than Grab’s in Indonesia.

Besides, GoTo offers bigger BNPL growth potential, helped by its TikTok Shop linkages.

“We see synergy NPV of acquisition of Gojek+fintech of $3 billion, but Grab’s balance sheet cash would be reduced to $700 million,” it said.

While it is hard to quantify the synergies, Maybank thinks Grab and GoTo are operating at a similar level of cost, such as for app development/maintenance, risk models, cloud/technology costs, and merchant relationship for their financial services.

“These costs are mostly fixed in nature. If the companies are combined, we see significant reduction in costs as duplicated operations can be removed,” it said.

Maybank, however, sees limited synergies between Grab’s and GoTo’s e-commerce business as this could lead to a notable loss in balance sheet strength if Grab acquires all of GoTo.

According to the research house, GoTo’s e-commerce exposure is totally unconnected with Grab’s businesses and as such it does not see any obvious synergies.

On the other hand, Grab’s balance sheet could slip to net debt of $500 million – not a very desirable scenario in a sector that is still prone to new players and technology disruptors, it said.

“That said, Grab (or GoTo) potentially divesting the e-commerce business post (or pre) M&A remains one of the viable options, thereby preserving balance sheet strength,” it said.

Overall, Maybank opined that a M&A would be a positive catalyst due to possible synergies for Grab (10 percent to 13 percent of NPV uplift) and potential for high cash dividends for GoTo shareholders.

Even if there’s no acquisition, the research house is positive on Grab and GoTo due to under-penetration in the market and benign competition allowing for low mid-teens on-demand gross merchandise value (GMV) growth while initiatives like ads, groceries and fintech etc create new growth/monetization avenues.

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