Applicants fill in forms to join Grab Vietnam at the company’s office in Hanoi. Associated Press

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

A special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.

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

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

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 US and China,” Brad Gerstner, founder and CEO of Altimeter, said in a statement.

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

The deals for Grab, which was valued at just over $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 localise 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 $39.6 billion on an initial proforma equity basis.

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

“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 $12 billion, was exploring a US listing.

Grab’s agreed transaction will surpass electric vehicle maker Lucid Motors’ $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 start-up.

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% 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, US-listed Sea is also muscling into food delivery and financial services in Indonesia. Both Grab and Sea won digital bank licences in Singapore last year.

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

Grab launched in 2012. In just a few years, it has become the largest ride-hailing firm in Southeast Asia, operating across eight countries in the region as well as Japan.

It is now a household name in the fast-growing region of 650 million people, where it provides not only transport but also food delivery and financial services. Japan’s SoftBank is a key investor.

Grab started life when Anthony Tan, who came from a family that ran a successful car sales business in Malaysia, hit on the idea of a taxi-booking app.

Tan turned his idea into a project while studying at Harvard Business School and in 2011, it won a school contest and a grant of $25,000.

He quit his job at the family business the following year and launched the app, GrabTaxi, in Malaysia together with a Harvard classmate.

It quickly gained popularity across Southeast Asia and expanded from taxis to private cars and motorbikes, providing alternative transport in the region’s often chaotic, traffic-clogged cities.