Grab Is Going Public in the Biggest SPAC Merger Yet

While the special purpose acquisition company (SPAC) mania has cooled off a bit in recent months, Grab is making a massive splash this week by announcing that it will be merging with Altimeter Growth Corp (NASDAQ: AGC) in a blockbuster deal valuing the private company at nearly $40 billion.

That makes the transaction the largest SPAC merger deal ever in terms of the target company’s valuation. Here’s what you need to know about Grab.

One App To Rule Them All

Grab can be loosely characterized as the “Uber (NYSE: UBER) of Southeast Asia,” offering ride-sharing and delivery services through a large network of contract drivers. In fact, Uber had previously sold its operations in the region to Grab in exchange for a 28% stake in the smaller company back in 2018, effectively conceding that market.

But Grab is far more than just local delivery and transportation. The company aims to become a dominant “superapp,” a category of mobile apps that attempt to offer every imaginable service to consumers. Tencent’s (OTC: TCEHY) WeChat pioneered the idea of a super app, and the category has grown primarily in Asian markets while struggling to gain traction in Western markets.

Beyond ride-sharing and local delivery, the Grab app also offers mobile payments, travel booking, insurance, and even investing services for consumers. For merchants, the startup can handle payment processing, small business financing, and “buy now, pay later” offers. The company also sells advertising and fraud detection services to larger enterprise organizations.

In terms of operating metrics, Grab had 25 million monthly transacting users (MTUs) as of December, with over 5 million registered drivers on the platform. Gross merchandise volume (GMV) last year was $12.5 billion, exceeding its pre-pandemic GMV levels. Adjusted net revenue in 2020 was $1.6 billion. GMV and adjusted net revenue are forecasting to grow to $34.2 billion and $4.5 billion, respectively, in 2023.

Grabbing a $39.6 Billion Valuation

The merger with Altimeter fetches Grab an astounding post-money equity valuation of $39.6 billion, the highest valuation a private company has ever secured in a SPAC transaction. The deal will raise a total of $4.5 billion in total proceeds for Grab, including $500 million in cash from Altimeter and its affiliates as well as a large $4 billion PIPE (private investment in public equity).

Prominent institutional investors participating in the PIPE include BlackRock (NYSE: BLK), Morgan Stanley’s (NYSE: MS) Counterpoint Global, T. Rowe Price (NASDAQ: TROW), and Fidelity, among others. The SPAC’s parent sponsor, Altimeter Capital Management, is also investing $750 million through the PIPE.

Altimeter is also committing to a 3-year lock-up period for its sponsor promote shares, signaling its confidence in Grab’s long-term prospects. The SPAC is even donating 10% of its sponsor promote shares to the GrabForGood fund, an endowment fund designed to support local communities in Southeast Asia.

The merger is expected to close in July, at which point the ticker symbol will change to “GRAB.”

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Evan Niu, CFA owns shares of Tencent Holdings. The Motley Fool owns shares of and recommends Tencent Holdings. The Motley Fool recommends Uber Technologies. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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