Grab plans $1.6 billion bond sale, fuelling hopes about takeover of Gojek parent GoTo

HONG KONG – Grab Holdings announced plans for a US$1.25 billion (S$1.61 billion) sale of bonds convertible into stock, fuelling speculation it is bulking up its war chest to take over Gojek parent GoTo Group. 

GoTo shares rose as much as 6.6 per cent in Jakarta on June 10 after Singapore-based Grab said on June 9 that it will issue convertible bonds that mature in June 2030, partly to fund potential acquisitions. 

Though Grab issued a separate statement on June 9 saying it was not currently in talks to buy GoTo, the bond sale sparked optimism about the prospects of combining the two dominant ride-hailing and food-delivery companies in the region. The pair have held on-and-off talks for years, but a combination never materialised, partly because of antitrust concerns likely to arise from such a merger. 

“There is a growing likelihood of a Grab-GoTo deal,” said Mr Nirgunan Tiruchelvam, an analyst at Aletheia Capital. “Grab seems to be lining up the financing for it.”

The securities will carry a coupon of 0 per cent to 0.5 per cent a year, payable semi-annually, and a conversion premium of about 35 per cent to 40 per cent to the stock’s closing price on June 10, according to terms of the deal seen by Bloomberg News.

Aside from possible acquisitions, Grab said it plans some share buybacks, which could facilitate initial hedges by investors in the deal, terms of the deal showed. The company had US$274 million remaining under its share-repurchase programme as at the end of March. The bonds will be redeemable, under certain conditions, from mid-2028. 

Grab’s offering is the largest Asian convertible-bond deal denominated in US dollars since Ping An’s US$3.5 billion deal in July 2024, and the biggest by a non-Chinese company since South Korean chipmaker SK Hynix’s US$1.7 billion issuance in 2023. Ping An last week also issued convertible bonds worth US$1.5 billion, denominated in Hong Kong dollars.

“This deal might appeal to convertible-bond traders, but it raises more questions than answers for long-term investors,” said Mr Mohit Mirpuri, a fund manager at SGMC Capital. “Unless there’s a strategic acquisition in play, it’s hard to justify adding to the cost of capital.”

Grab said in its stock exchange filing on June 9: “There have been media reports that we are engaged in discussions for a potential transaction with GoTo Gojek Tokopedia. The parties are not involved in any discussions at this time and Grab has not entered into any definitive agreements.” 

A potential sale of GoTo has sparked worries among Indonesia’s political leadership about the loss of independence and developer and engineer jobs. Some have also expressed concerns that ride-hailing and food-delivery prices would rise if Grab becomes dominant in a tough economy where consumers are already facing hardship.

Indonesia’s sovereign wealth fund Danantara has been considering a role in a Grab-GoTo combination, possibly helping to assuage concerns in the government resulting from the sale of the national technology champion, Bloomberg News reported last week.

Grab, the largest of South-east Asia’s ride-hailing and delivery firms, has been locked in fierce competition with GoTo for almost a decade. It is the leading provider in its Singapore home market and countries including Malaysia and Thailand.

While the companies’ rivalry has weighed on their efforts to reach consistent profitability, they have benefited from user growth in the emerging economies they operate in. On-demand transactions – including meal delivery – grew 19 per cent in the two-month period covering April and May, versus a year earlier, Grab said in a separate release on June 9.

GoTo has pulled out from countries including Thailand and Vietnam after a fierce cost-cutting drive, but remains a formidable player in Indonesia – the region’s biggest market. Acquiring GoTo would give Grab a stronger position in the country of more than 275 million.

“We will continue to maintain a high hurdle rate when deploying our capital, and will have a balanced approach to investing for organic, profitable growth, and be highly selective on inorganic opportunities, in line with our capital allocation framework,” Grab said in its filing.

Shares of Grab dropped 3.9 per cent to US$4.98 in US trading on June 9. The stock has advanced 41 per cent in the past 12 months as Grab’s profitability improved, but remains down more than 50 per cent since its listing in New York through a merger with a blank-cheque firm in late 2021. BLOOMBERG