Alibaba eyeing cornerstone stake in Grab

Attracted by a massive database of customer behavior spanning eight countries, Chinese tech giant Alibaba is said to be on the brink of investing US$3 billion into Grab Holdings.

With its origins as a ride-hailing company Grab has expanded into an app-anchored ecosystem covering food delivery, payments, courier services, and wealth management. It also operates cloud kitchens in several markets.

In Southeast Asia, where the vast majority of Grab’s business is conducted, there would be potential synergies with Alibaba’s Lazada online marketplace, not just through marketing alliances and cross-promotions, but in last-mile delivery solutions.

Citing “people familiar with the matter,” Bloomberg has reported that Alibaba will deploy some of the funds to acquiring part of Uber’s stake in Grab, the result of a merger deal in March 2018 which saw Uber’s regional operations and brand name disappear leaving Grab in a market-dominating position.

Grab currently has a market valuation of $14 billion which means Alibaba’s investment would equate to about 20 percent of its value.

The negotiations come at a time when Grab and its archrival GoJek are under increasing pressure to explore merger opportunities which would reduce intense competition between the two companies, most likely raising fares and fees and thus creating a more viable long-term business model.

As Bloomberg put it, existing investors in Grab have been frustrated by what they see as value-destroying competition with GoJek. But negotiations of a merger “are hampered by a hostile relationship between the two companies and the complexity of coordinating between so many investors,” Bloomberg reported, citing sources.

Any attempt at a merger between Grab and GoJek would spark a tortuous path of negotiations with regulatory bodies in the region given in most of the countries in which the two operate, they are the dominant players leading to market dominance concerns.