This will be the largest SPAC merger in history.

Grab, the Southeast Asian giant that straddles ride-hailing, online food delivery, and digital wallet payments in the region with its super-app, has agreed to go public in the U.S. through a SPAC transaction. The SoftBank-backed startup will merge with Altimeter Growth Corp. (NASDAQ: AGC) and thereafter trade on the NASDAQ with the ticker GRAB. (CNBC)

Grab values at $39.6 billion

The merger with blank-check company Altimeter values Grab at $39.6 billion, making it the largest SPAC deal ever.

SPACs, or blank-check companies, typically raise money from investors and list on an exchange. They then use the funds to acquire private companies or startups looking to go public through a route that is less arduous and expensive compared to a traditional IPO.

A “private investment in public equity” (PIPE) transaction worth more than $4 billion was led by funds managed by Altimeter Capital Management, LP which committed US$750 million, with participation from funds and accounts managed or advised by BlackRock, Counterpoint Global (Morgan Stanley Investment Management), and T.Rowe Price Associates, Inc., as well as Fidelity International, Fidelity Management and Research LLC, Janus Henderson Investors, Mubadala, Nuveen, Permodalan Nasional Berhad, and Temasek.

Leading family groups from Indonesia including Djarum, the Sariaatmadja family, and Sinar Mas also participated in the PIPE.

The PIPE offering had to be upsized due to significant investor interest, in a validation of the SPAC transaction.

As part of the deal, Grab will receive about $4.5 billion in cash.

Altimeter Growth and Grab will become wholly-owned subsidiaries of a new holding company.

Grab: Pandemic effect

Grab boasts of more than 187 million users in more than 350 cities across eight countries. During the pandemic, Southeast Asia and Grab witnessed a huge surge in demand for e-commerce, food delivery, and online payment services.

A report from Google, Temasek Holdings, and Bain & Company said that 40 million people in six countries across the region — Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand — came online for the first time in 2020.

During 2020, Grab said it clocked GMV of about US$12.5 billion in 2020, surpassing pre-pandemic levels and more than doubling from 2018.

Prospects

Meanwhile, according to Grab, Southeast Asia is one of the fastest-growing digital economies in the world, with a population approximately twice the size of the United States. Yet online penetration for food delivery, on-demand mobility, and electronic transactions are insignificant compared to the volumes in U.S. and China.

“Across online food delivery, ride-hailing, and digital wallet payments, Grab expects its total addressable market to grow from approximately US$52 billion in 2020 to more than US$180 billion by 2025,” the company said in a statement.

The company also said it is already a category leader in the region across its core verticals of ride-hailing (about 72% of total regional GMV), online food delivery (50% of GMV), and digital wallet payments (23% of TPV).

Anthony Tan, Group CEO and Co-founder, Grab said: “Altimeter is investing in a way that demonstrates our aligned values, with a three-year lock-up on their sponsor promote shares and unprecedented contribution of shares to our new GrabForGood endowment fund. They’re joining our journey for the long run, together with an incredible day one cap table of renowned institutional investors and sovereign wealth funds. This is testament to the global investment community’s belief in the long-term value proposition of Grab’s super-app strategy and the exciting growth potential of Southeast Asia.”

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