Grab to go public in record-breaking SPAC merger

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 wsj 3 min read . Updated: 13 Apr 2021, 07:00 PM IST JING YANG, The Wall Street Journal

Grab Holdings Inc. said it would go public on the Nasdaq Stock Market by merging with a special-purpose acquisition company, securing a near-$40 billion valuation in a new milestone for the SPAC boom that has swept U.S. financial markets.

The $39.6 billion deal to list Grab, a ride-hailing, food-delivery and digital-wallet group that operates across much of Southeast Asia, is by far the biggest involving a blank-check company and means Grab’s valuation has more than doubled in just 18 months. The merger also comes alongside a $4 billion-plus fundraising, which is the largest-ever share sale by a Southeast Asian company in the U.S.

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Singapore-headquartered Grab said Tuesday it would merge with Altimeter Growth Corp., a SPAC sponsored by Altimeter Capital, of Menlo Park, Calif., confirming details reported earlier by The Wall Street Journal.

The Grab merger adds to a frenzy of SPAC-related deal making. A record $99 billion has been raised in the U.S. by a total of 306 SPACs this year, according to SPAC Research data, and some 435 of these vehicles are still seeking a merger target.

As part of the deal, more than $4 billion has been committed in a so-called PIPE, a type of funding round that typically accompanies such mergers with blank-check companies. PIPE stands for “private investment in public equity." Grab will receive a maximum of about $4.5 billion in cash from the transaction.

Altimeter Capital, which has $16 billion under management, is leading the PIPE round with a $750 million contribution. Other investors include BlackRock Inc., Morgan Stanley’s Counterpoint Global and T. Rowe Price Associates Inc., as well as sovereign investors such as Mubadala of Abu Dhabi, Permodalan Nasional Berhad of Malaysia and Singapore’s Temasek.

Grab, which started in 2012 as a ride-hailing service in Southeast Asia, has turned itself into a superapp, a single platform that provides a range of services. As part of this, Grab offers food and grocery delivery and financial services. Its top backers include the SoftBank Vision Fund, Uber Technologies Inc. and Chinese ride-hailing giant Didi Chuxing.

Grab has had more than 214 million app downloads across the eight Southeast Asian countries where it operates. The pandemic has bolstered Grab’s delivery services, as drivers were able to switch from transporting customers to carrying deliveries, a flexibility that wouldn’t be possible in many developed countries. The company recorded $12.5 billion in gross merchandise value last year, surpassing the pre-pandemic level and more than double the 2018 level.

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Before Tuesday’s transaction, Grab was last valued at around $15 billion after an October 2019 funding round, according to PitchBook data.

Grab isn’t profitable yet. In January, Moody’s Investors Service said it expects the company to remain loss-making until 2023. Moody’s has a B3 credit rating on Grab, several notches below investment grade.

Recently, Grab said its ride-hailing business has turned profitable on an Ebitda basis—referring to earnings before interest, tax, depreciation and amortization—in all the markets in which it operates and its delivery business was profitable in five out of the six countries where it is present. Those developments helped improve the confidence of prospective investors when the deal was being marketed, according to people familiar with the transaction.

The pandemic has lifted the stocks of companies like Uber—which is now worth more than $110 billion—and DoorDash Inc., which went public in December at a $39 billion valuation.

Units of Evercore Inc., JPMorgan Chase & Co., and Morgan Stanley advised Grab and acted as placement agents for the deal, alongside a unit of UBS Group AG.

This story has been published from a wire agency feed without modifications to the text.

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