JAKARTA — Two of Indonesia’s largest tech startups, Gojek and Tokopedia, announced on Monday they will merge, a move that will create one of Southeast Asia’s biggest tech conglomerates and cover everything from ride hailing and digital payments to e-commerce.
The merger will reshape the competitive landscape of the region’s tech scene, which will now become a three-way battle between Singapore-based Sea, Grab and Go To Group, as the newly combined Indonesian companies will be called.
Gojek and Tokopedia announced in a joint news release that they have “combined their business.”
The companies began discussing a possible merger earlier this year, and negotiations accelerated in early April when both sides moved to seek approval from their respective investors.
They each count U.S. tech giant Google and Singapore’s state investor Temasek among their shareholders. Other investors in Gojek include Facebook, which invested in the company’s payment arm, global private equity company KKR as well as Indonesian conglomerate Astra International. Tokopedia’s biggest shareholder is SoftBank, followed by Chinese e-commerce giant Alibaba.
Gojek initially held merger discussions with Grab last year, but the deal collapsed as they could not reach an agreement on the shareholding ratio of a combined entity. Grab has since announced plans to go public in the U.S. via a special purpose acquisition company, or SPAC, seeking a valuation of $39.6 billion in what would be the biggest-ever deal of its kind.
A merger between Gojek and Tokopedia will face less regulatory scrutiny than a Gojek-Grab merger, as their business overlaps are limited.
The decision comes as competition in the region’s tech sector heats up, especially as Sea makes aggressive inroads into sectors that had been the stomping ground of Gojek and Tokopedia.
Sea, the region’s biggest tech company by market capitalization, has expanded into areas such as e-commerce and food delivery by offering aggressive promotions, backed by a fat war chest it built up through its ability to tap the public market.
Grab’s SPAC deal also means it will have the ability to access the public market to fund its spending to survive the competition, while other tech companies like Indonesia’s travel tech startup Traveloka are also seeking to go public.
Go To Group will also be aiming to go public, both in the U.S. and its home market Indonesia. Sources have said when it does go public, it will aim for a valuation similar to or higher than Grab’s, as the entity will have an e-commerce arm, which would be more appealing to potential investors by virtue of offering more diverse services compared with Grab.
