Two apps, one landlord (the merger might even help you, briefly)

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Grab Holdings, a Singapore company, is working to buy GoTo, the Indonesian company that owns the apps most of Indonesia uses to get a ride and most of its small restaurants use to sell lunch, at a price that values GoTo somewhere around US$7 billion (which is a number worth holding lightly, since GoTo’s public market value has been closer to US$4.2 billion and Grab’s own is around US$18.5 billion, and the gap between what a thing trades at and what an acquirer will pay for it is the entire reason mergers are interesting). The deal is not done. It has been not-done for a while now, which is itself the story.

What is holding it up is partly a 2 percent stake. Telkomsel, a joint venture of Telkom Indonesia and Singtel, put roughly US$450 million into GoTo in 2020 and 2021, and selling that stake at today’s prices would lock in a loss on state-linked money, which under Indonesian law is not merely embarrassing but can be treated as a matter of criminal liability for the officials who signed off. So a 2 percent holder is, reasonably, declining to sell at a loss it could be prosecuted for, and a US$7 billion deal waits on it. This is a very good illustration of the principle that the small numbers on a cap table are often the ones with the lawyers.

The funnier part is the fix. Danantara, Indonesia’s new sovereign wealth fund, has been buying GoTo shares on the open market, so far less than 1 percent, with its chief executive saying plainly that it intends to raise the holding over time, and the earlier reporting put the ambition at something like 5 to 10 percent. The logical reading is that the state takes a minority slice so that a Singapore firm owning Indonesia’s largest tech company reads, in the domestic press and in the president’s populist register, as Indonesia keeping a hand on the wheel rather than as Indonesia selling the wheel.¹ A sovereign fund taking a small slice to fix the optics of who owns the big slice is one of the more honest descriptions of how strategic industries actually get governed.

And then there is the part that nobody buying the stock is pricing, because it does not show up on Grab’s income statement until later. KPPU, Indonesia’s competition regulator, has noted that a combined Grab-GoTo would hold something like 80 to 90 percent of ride-hailing and food delivery; Euromonitor puts Indonesian ride-hailing nearer 91 percent and Singapore around 90. KPPU can only formally review the thing after it happens, which it has politely pointed out while inviting the two companies to consult voluntarily, an invitation with roughly the warmth of a tax audit.

Here is the merger from the side of the warung owner who sells nasi goreng through both GoFood and GrabFood. Today she lists on both because they compete for her, which means they discount to win her customers and they think twice before raising her commission, currently somewhere between 15 and 30 percent of each order. The steelman is real: one integration instead of two, better logistics, more reach, and in the short run a merged platform might genuinely lower her costs. And yet the structural fact is that her two suppliers of demand are about to become one, and a single channel has only ever moved its take rate in one direction. You can watch the future on the mainland, where Meituan’s 70-percent-plus grip on Chinese food delivery has made merchant commissions a recurring political subject.

Platform competition is temporary. Platform power is not.

So the executive read is unglamorous. A near-monopoly is genuinely good at exactly one thing the small merchant wants, which is reach, and its commission is a number that has only ever travelled in one direction. The merchant who survives the merger is the one who treats the platform as rented distribution and keeps the deed to her own customer somewhere else: the phone number, the standing order, the second visit, the transaction the landlord never gets to see and so never gets to tax. Platform competition is temporary. Platform power is not.

A structure floated in some coverage is a state-held “golden share” carrying a veto over pricing, which is a polite way of saying the government would like the option to be the antitrust regulator and a shareholder at the same time, a position with obvious tensions and obvious appeal. ↩

Footnotes