SINGAPORE (BLOOMBERG) - Alibaba Group Holding is in talks to invest US$3 billion (S$4.1 billion) into South-east Asian ride-hailing giant Grab Holdings, according to people familiar with the matter.
The Chinese e-commerce giant, a sole investor in the round, will spend a portion of the funds to acquire some of the Grab stock held by Uber Technologies, one of the people said, asking not to be named as the discussions are private.
The deal may represent one of Alibaba's biggest bets on South-east Asia since its first investment in Lazada in 2016. China's largest corporation has previously had limited forays in ride-hailing but a potential tie-up with Grab gives it access to data on millions of users in eight countries, a growing delivery fleet as well as a stake in digital wallet and financial services.
The funding - about a fifth of Grab's last known valuation of US$14 billion - comes amid growing questions over the company's ability to live up to its lofty price tag as it grapples with the impact of the coronavirus pandemic. Chief executive officer Anthony Tan said the company is facing its "single biggest crisis", while co-founder Tan Hooi Ling warned in May of a "long winter".
Existing investors have also been frustrated by what they see as value-destroying competition with Grab's regional archrival Gojek.
The world's biggest ride-hailing companies have waged years of costly battles in each others' territories before they agreed to stay out of each others' core markets. The truce left Uber with considerable stakes in its rivals worth more than US$9 billion, including a 23.2 per cent stake in Grab at the end of 2018.
Under the terms of a deal that Uber struck to exit South-east Asia, Grab is on the hook for more than US$2 billion to the San Francisco-based company if it doesn't go public by mid-2023.
Mr Masayoshi Son's SoftBank Group, an investor in all of the world's biggest ride-hailing companies, is at the centre of the discussions. The Japanese company has used its position as a major shareholder to push Uber to unload stakes in Grab, Didi Chuxing of China and Russia's Yandex, the person said.
Uber said in April it would write down about US$2 billion in those investments after the coronavirus pandemic upended the ride-hailing business. Representatives of Grab declined to comment, while Uber and Softbank didn't immediately reply to queries. Alibaba offered no immediate comment.
SoftBank has also pushed Grab to make peace with Gojek. Even as speculations about a possible merger have re-surfaced, the two are far from reaching a deal, according to people familiar with the matter. The negotiations are hampered by a hostile relationship between the two companies and the complexity of coordinating between so many investors, they said.
JPMorgan Chase is advising Grab and Goldman Sachs Group is advising Gojek, other people familiar with the matter said. One scenario discussed in the past is potentially combining only the companies' transportation business in Indonesia, one of them said. Grab and Gojek, valued at US$10 billion, are fierce rivals with an ambition to create an all-in-one "super app." They also compete in food delivery and financial services.
Indonesia, by far the largest and the most promising market in South-east Asia, remains the key sticking point in any potential merger, with both companies wanting a majority stake in the merged business there, according to the people. Gojek, seen as Indonesia's national champion whose app has been downloaded most in the country, won't be squeezed into a deal, according to another person familiar with the discussions. It has in the past denied merger speculation.
Any deal would also likely face regulatory hurdles because it would combine the top two players in the region, reducing competition in ride-hailing and newer fields like food delivery and finance.
The pandemic and lockdown measures have battered both companies, forcing them to cut jobs and streamline their businesses. Still, Gojek pulled in new capital from Facebook and PayPal Holdings, a show of confidence in its efforts to create a digital payments platform in the region.