Grab’s $40 bln debut comes with twin airbags

ReNew Energy Global

14/04/2021 01:37

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own. Repeats with no changes to text.)
    By Una Galani
    MUMBAI, April 13 (Reuters Breakingviews) - Silicon Valley
investor Altimeter Capital has sketched a handy roadmap for
speeding hot Asian technology companies to overseas public
markets. Southeast Asian ride-hailing-to-delivery-to-payments
group Grab is listing in New York via a combination with a
blank-cheque firm. It’s the largest so-called SPAC merger, with
a structure that cushions the SoftBank-backed  9984.T  company’s
amped-up $39.6 billion equity valuation.
    Bankers have been scratching their heads over ways to
introduce U.S. investors to fast-growing companies from a
relatively unknown region. One approach is to assign
conservative growth forecasts and valuations. That’s what RMG
Acquisition Corp II  RMGB.O , led by Riverside Management’s Jim
Carpenter, did in February with its $4.4 billion purchase of
India’s ReNew Power, one of the few such sizeable deals thus far
from Asia.
    Altimeter’s route is different. It values the
Singapore-based group’s loss-making business, minus cash, at a
generous 13 times its own estimate for 2021 sales, a multiple
twice that of peer and backer Uber Technologies  UBER.N . The
number looks only slightly better against Sea  SE.N , a $120
billion e-commerce-to-games-to payments giant, also based in
Singapore, that trades at 14 times sales in New York. Grab
expects its revenue to grow at a stunning compound annual rate
of 42% between now and 2023. 
    However, A-list investors like Singapore’s Temasek,
BlackRock  BLK.N  and Fidelity coming into the Grab transaction
through a $4 billion private placement of shares can take some
comfort. Altimeter is contributing almost one-fifth of the
placement and will backstop any redemptions from the SPAC to the
tune of $500 million. It has also volunteered to a three-year
lockup for some of its shares, three times the norm. Together,
those moves inject more credibility to Grab’s bullish forecasts.
    Even so, the valuation piles the pressure on co-founder and
Chief Executive Anthony Tan. By Grab’s own EBITDA yardstick, its
ride-hailing business is already profitable, and it expects its
delivery operations, serving a region with a population twice
that of the United States, to break even later this year. Tan’s
challenge is to do the same in fintech as it expands beyond
simple payments to insurance, wealth management and loans. He
also needs to ensure competition against Gojek in Indonesia
doesn’t burn cash. Having bought into a premium valuation,
investors need him to keep his eyes on the road.
    On Twitter https://twitter.com/ugalani
    
    CONTEXT NEWS
    - Singapore-based technology firm Grab is going public in
New York via a merger with special-purpose acquisition company
Altimeter Growth, Grab said on April 13. 
    - The merger values the SoftBank-backed firm’s equity at
$39.6 billion on a post-money basis. Grab is raising an
additional $4.04 billion from investors through a private
placement of shares, of which Altimeter Capital will contribute
$750 million. Grab will receive cash proceeds of approximately
$4.5 billion.
    - Altimeter’s shares will also be subject to a three-year
lockup period. Investors in the private placement include
Singapore sovereign wealth fund Temasek, T. Rowe Price,
BlackRock, Abu Dhabi’s Mubadala and Morgan Stanley's
Counterpoint Global. 
    - Grab, which was founded in 2012, offers ride-hailing,
digital payments and other mobile services. The deal is expected
to close in July 2021.
    - Evercore, JPMorgan and Morgan Stanley advised Grab.
Evercore and UBS acted as co-placement agents to Altimeter
Growth on the private placement.  
    - For previous columns by the author, Reuters customers can
click on  GALANI/   
 

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Grab agrees world's biggest SPAC merger, valued at nearly $40
bln     urn:newsml:reuters.com:*:nL1N2M609X
Grab presentation     https://assets.grab.com/wp-content/uploads/media/ir/investor-presentation.pdf
Grab press release     https://www.businesswire.com/news/home/20210413005562/en
BREAKINGVIEWS-Grab listing offers up an Uber uber   
 urn:newsml:reuters.com:*:nL1N2LD016
BREAKINGVIEWS-Grab CEO will step into 2021 tech limelight   
 urn:newsml:reuters.com:*:nL4N2IR1SB
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe
 | Editing by Ed Cropley and Karen Kwok)
 ((una.galani@thomsonreuters.com;  Reuters Messaging:
una.galani.thomsonreuters.com@reuters.net))