Indonesian ride-hailing startup Gojek and e-commerce marketplace Tokopedia announced their long-awaited merger to form the GoTo Group, Indonesia’s largest digital services platform. The joint entity will provide ride-hailing, logistics, e-commerce, and a slew of fintech and SME-related services.
The merger is thought to be a way for both companies to fend off competition from Singapore-based rivals Grab and Sea Group. Gojek is reportedly losing market share to Grab, while Tokopedia faces stiff competition from Sea Group’s Shopee. The ShopeePay e-wallet had also eclipsed GoPay and other Indonesian e-wallets in the first quarter of this year.
Following the merger, Gojek and Tokopedia will continue to operate under their existing brands. A new brand called GoTo Financial will include GoPay and various products in the merchant and fintech verticals. Part of the merger talks reportedly included plans to list the combined entity in Indonesian and US stock exchanges, with a target valuation of up to $40bn.
According to a joint press release on Monday, May 17, the combined total gross transaction value (GTV) of both companies in 2020 went over $22bn, equivalent to 2% of Indonesia’s $1.1tn GDP last year. The release added that GoTo’s $18bn valuation is based on Gojek’s 2019 valuation of $10.5bn and Tokopedia’s valuation of $7.5bn in early 2020.
Gojek co-CEO Andre Soelistyo will become CEO of the GoTo Group and GoTo Financial, while Tokopedia’s president Patrick Cao will become the GoTo Group’s president. Kevin Aluwi and William Tanuwijaya will continue to serve as the CEO of Gojek and Tokopedia, respectively.
Soelistyo said in the press release that Gojek’s drivers would deliver more Tokopedia packages while merchant partners of both companies will benefit from the combined business software and services. The GoTo Group will also “increase financial inclusion in an emerging region with untapped growth potential,” he added. Both companies have more than 2m drivers and 11m merchant partners.
On the IPO journey
Tokopedia’s VP of Corporate Communications, Nuraini Razak, told Indonesian news site Liputan6.com that while Gojek and Tokopedia will focus on integrating their services, the merger will speed up the move to go public. “We have always stated clearly that we intend to perform an IPO, and the combination of our businesses will accelerate our IPO plans,” he said.
Gojek and Tokopedia are aiming to list on the Indonesian exchange’s mainboard. However, to list on the mainboard, a company must record net profits in the previous financial year and have tangible assets valued at IDR 100bn. Neither company has achieved profitability.
Tokopedia was founded in 2009 by William Tanuwijaya and Leontinus Alpha Edison, who is Tokopedia’s vice chairman. Gojek was established a year later by Nadiem Makarim, Kevin Aluwi and Michaelangelo Moran as a call center service that connected motorcycle taxis, known as “ojek,” with passengers.
Both companies have since grown to offer more services, especially in the financial services area. Gojek leveraged its network of drivers to start logistics and lifestyle services and launched payment services under the GoPay brand. Tokopedia, through partnerships with other startups, offers microinsurance products, bill payment services, and investment products.
Gojek and Tokopedia share several common investors, including Sequoia Capital India, Google and Temasek. Shailendra Singh, Managing Director of Sequoia Capital India, said in the merger press release that “there is no modern internet company […] that has such deep ownership of so many categories at the same time.”
Other notable investors in GoTo Group include Warburg Pincus, KKR, BlackRock, Facebook and SoftBank. Rival Chinese internet giants Alibaba and Tencent also invested in Tokopedia and Gojek, respectively.