Grab Issues $12.5B Bonds, GoTo Shares Surge 6.6% Amid Merger Speculation

Grab Holdings, a leading ride-hailing and food delivery company headquartered in Singapore, has announced its intention to issue 12.5 billion dollars in convertible bonds. This announcement has ignited speculation that the company is preparing to acquire GoTo Group, a significant player in the logistics and transportation sector in Southeast Asia. The news comes as Grab's stock price surged, with GoTo's shares in Jakarta rising by 6.6% on Tuesday. Grab's decision to issue bonds maturing in June 2030, with a face value interest rate of zero to 0.5% per annum, has fueled optimism about a potential merger between the two dominant companies in the region.

Grab's statement on Monday clarified that there are currently no ongoing negotiations for the acquisition of GoTo. However, the issuance of these bonds has reignited discussions about the possibility of a merger, which has been a topic of interest for several years. Previous attempts at a merger have been hindered by concerns over antitrust regulations. Analysts have noted that Grab appears to be raising funds for a potential acquisition, increasing the likelihood of a deal.

The convertible bonds, which offer a conversion premium of 35% to 40% above Grab's closing price on Tuesday, are designed to provide flexibility for potential investors. The bonds will be redeemable under specific conditions starting from mid-2028. Additionally, Grab has indicated plans to repurchase some of its shares, which could serve as a hedge for investors in the event of a transaction. As of March 31, Grab had 2.74 billion dollars remaining in its share repurchase program.

The transaction, which is being coordinated by several major financial institutions, has drawn mixed reactions from financial experts. Some have expressed skepticism, stating that while the bonds might attract convertible bond traders, they raise more questions than answers for long-term investors. The increased capital expenditure would be difficult to justify without a strategic acquisition.

The speculation surrounding Grab's potential acquisition of GoTo highlights the dynamic nature of the Southeast Asian market, where consolidation among major players could reshape the competitive landscape. As Grab continues to expand its services and presence in the region, the issuance of these convertible bonds signals a strategic move to secure the necessary funds for future growth and potential acquisitions. The outcome of these developments will be closely watched by industry observers and investors alike.