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Applicants fill in forms to join Grab Vietnam at the company's office in Hanoi, Vietnam on May 24, 2017.

Tran Van Minh/The Associated Press

Southeast Asia’s biggest ride-hailing and food delivery firm, Grab Holdings Inc., agreed to a merger on Tuesday with special-purpose acquisition company Altimeter Growth Corp., securing a valuation of nearly US$40-billion and paving the way for a coveted U.S. listing.

The merger, the biggest blank-check company deal ever, underscores the frenzy on Wall Street as shell firms have raised US$99-billion in the United States so far this year after a record US$83-billion in 2020.

Singapore-based Grab’s agreement with the SPAC backed by Altimeter Capital includes a more than US$4-billion private investment in public equity by investors including BlackRock, Temasek Holdings, Fidelity International and Janus Henderson Investors.

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Grab said its decision to become a public company was driven by a strong financial performance last year.

“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 a fraction of the U.S. and China,” Brad Gerstner, founder and CEO of Altimeter, said in a statement.

The equity offering is led by US$750-million from funds managed by Altimeter Capital.

The deals for Grab, which was valued at just over US$16-billion last year, will be a big win for its early backers such as SoftBank Group Corp. and China’s Didi Chuxing. The transactions validate Grab’s co-founder Anthony Tan’s strategy of aggressively tapping growth in new sectors and ramping up market share by pumping billions of dollars to localize its services and invest in high-growth economies.

Reuters earlier reported that Grab would announce the deal on Tuesday.

After the deals, Altimeter Growth and Grab will become fully owned subsidiaries of a new holding company, which is expected to be valued at about US$39.6-billion on an initial proforma equity basis.

The transactions will provide Grab with about US$4.5-billion in cash proceeds.

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“Institutional investors looking for Asian consumer internet exposure are keen to diversify their allocation beyond a handful of companies,” said Varun Mittal, head of emerging markets fintech business at consultancy EY.

The deals, which have been approved by the boards of both Grab and Altimeter Growth, are expected to close over the next few months, subject to shareholder approvals.

Grab attracted global attention in 2018 when it acquired Uber’s Southeast Asia business after a costly five-year battle and in return took a stake in the company.

Reuters reported in January that Grab, which has so far raised about US$12-billion, was exploring a U.S. listing.

Grab’s agreed transaction will surpass electric vehicle maker Lucid Motors’ US$24-billion deal struck with a SPAC in February.

BATTLEGROUND INDONESIA

With operations in eight countries and 398 cities, Grab is already Southeast Asia’s most valuable startup.

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Leveraging its ride-hailing business started in 2012, the firm has moved into food and grocery deliveries, courier services, digital payments, and is now making a push into insurance and lending in a region of 650 million people.

The listing will give Grab extra firepower in its main market, Indonesia, where local rival Gojek is close to sealing a merger with the country’s leading e-commerce business, Tokopedia.

Grab, whose net revenue surged 70 per cent last year, has yet to turn profitable, but it expects its biggest segment – the food delivery business – to break even by end-2021, as more consumers shift to online food delivery after the COVID-19 pandemic.

Cash-rich, U.S.-listed Sea is also muscling into food delivery and financial services in Indonesia. Both Grab and Sea won digital bank licenses in Singapore last year.

Evercore was the lead financial adviser to Grab on the deal and JPMorgan and Morgan Stanley were co-advisers.

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