Investors may want to dig out a movie that aired in 1997. My Best Friend’s Wedding was a romantic comedy that swept the awards.
It features Julia Roberts as the best friend of the groom. She sports a dimpled smile and shoulder-length curls. Her magnetic charm is at the centre of the film.
The groom is about to wed an heiress in Chicago, played by Cameron Diaz. All heiresses are beautiful. Cameron Diaz was no exception.
Julia Roberts is jealous of the match. Julia Roberts tries to sabotage the wedding and run off with the groom.
The movie seems dated 28 years later. Email was viewed as high-tech then. It was held in awe like the way we view quantum computing today. There was no social media and the brick-sized mobile phones did not have data connections
But, the movie may provide lessons for a love triangle in the 21st century. This romance is not in the American Midwest but is in the tropics.
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There is discussion of a possible merger between Grab and GoTo. These two companies are giants of ride-hailing, food delivery and online payments.
The merger has been talked about for a while. Readers will forgive me for blowing my trumpet. If I don’t, then who will? It was I who first raised its likelihood in January 2023.
According to The Straits Times, the merger would be worth US$7 billion ($9.5 billion). The scenario that is mentioned would involve an issue of shares to GoTo. GoTo would be issued shares in the Nasdaq-listed Grab.
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Like the match in the movie, it will be one made in heaven. Grab is like the groom. It is solid and dependable. It dominates ride-hailing and food delivery in Asean. Its market share is at least twice that of the next player in each business segment. Grab has a broad regional footprint with over 42 million users.
GoTo is like the sweet and plucky Cameron Diaz. It brings e-commerce strength and a tight grip on the Indonesian market.
The merger will create a combined gross merchandise value of US$30 billion in e-commerce. GoTo has a tie-up with TikTok in e-commerce. This would be over a third of the entire Asean e-commerce market.
In ride-hailing, the combined would command just over 60% of the gross market value of the Asean market. It would give the combined entity (let’s call it GrabTo) with the scale to be more efficient. It may be able to provide quicker ride-hailing.
Also, the operating expenses could be cut in the combined entity. There would be less need to provide incentives to riders and users.
There is a major hurdle, though. The regulators could step in. There is complex regulation in the ride-hailing industry that could be a stumbling block. The Land Transport Authority and Competition and Consumer Commission of Singapore may need to authorise the union. The regulators in several countries could also take a dim view of an Asean behemoth.
A wedding crash may complicate the picture. In My Best Friend’s Wedding, Julia Roberts waits until the last moment to tell the groom how she feels. Uber, the dominant player in ride-hailing, could do the same. Uber owns a 27.5% stake in Grab. This was the consequence of the 2018 deal that saw it exit Southeast Asia in exchange for an equity position. Uber now has a US$167 billion market cap and a cash pile of US$7 billion. A bid for the combined entity would be easy to finance.
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That means if Uber really wanted Grab, it wouldn’t be starting from scratch. A last-minute counteroffer could make things messy. It could complicate negotiations and rattle the market.
Why would Uber want to crash this wedding? Uber has been on a global expansion spree, increasingly looking at emerging markets. Its main focus has been on its high-margin mobility business. Re-entering Southeast Asia through an acquisition would immediately give it control of the region’s dominant player.
Julia Roberts does not get the guy. If the script holds, Grab and GoTo will merge, and Uber will be on the sidelines. Investors need to brace themselves for a drama. It may have a different ending than in the movie.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era
