GRAB Holdings Ltd and Jaya Grocer Holdings Bhd took the market by surprise with their merger and acquisition deal this week.

On Tuesday, Grab, the largest ride-hailing and food delivery firm in South-East Asia, made an announcement with the US Securities and Exchange Commission (SEC) on its plan to buy grocery chain Jaya Grocer Holdings Sdn Bhd.

A source says Grab is seeking to cement its position in the same-day grocery delivery segment amid increasing demand for online deliveries.

The move to acquire Jaya Grocer, which has more than 40 stores across Peninsular Malaysia, follows Amazon’s move to buy the 40-year-old supermarket chain Whole Foods.

Grab is a service provider for ride-hailing, food and grocery delivery and digital financial services through phone applications in South-East Asia.

It has signed partnerships with supermarket and grocery chains across South-East Asia.

Grab delivery in Kuala LumpurGrab delivery in Kuala Lumpur

“It looks like they (Grab and Jaya Grocer) want to be like Amazon and Whole Foods,” says a market observer.

“Grab has the logistics chain for food and grocery delivery and Jaya Grocer will manage the supply side,” he adds.

Grab started grocery deliveries in 2019 just before the Covid-19 pandemic hit.

Since then, it has been expanding its delivery business as the pandemic had accelerated the adoption of e-commerce and same-day delivery.

However, the price of the Grab-Jaya Grocer deal was not disclosed in the filing. A source however points out that it could be to the tune of RM1.2bil to RM1.5bil.

In its filings with the SEC, Grab said it had inked a share purchase agreement with the current shareholders of Jaya Grocer to acquire all of Jaya Grocer’s ordinary shares and 75% of its preference shares.

The remaining 25% preference share is likely being held by the Teng family, the Malaysian family that founded and owns the chain.

Grab will have the option to buy the remaining 25% of the preference shares of Jaya Grocer after the close of the transaction.

Grab intends to partner with a local investor which will own 50% of the voting shares in Jaya Grocer.

It expects to complete the deal in the first quarter of 2022.

“Following closing, Jaya Grocer is expected to become a subsidiary of Grab and its financial results will be consolidated by Grab,” Grab says.The Grab-Jaya Grocer deal came about 17 days after the Teng family bought back their stake in Jaya Grocer from AIGF Advisors Pte Ltd.It was reported that Teng family bought back its 45% stake in Jaya Grocer at RM411mil, which valued Jaya Grocer at RM903mil. AIGF bought a 45% stake in Jaya Grocer for RM300mil in 2016, when it had 16 outlets. That deal would have then valued Jaya Grocer at RM666mil.

Other interested buyers at that time for Jaya Grocer reportedly included two other private equity (PE) firms namely TPG Growth and Creador.

Since then, Jaya Grocer has expanded organically to more than 40 stores across Peninsular Malaysia today.

Jaya Grocer has been a beneficiary of the pandemic as more people opted to cook at home.

Based on Jaya Grocer’s accounts obtained by StarBiz, the company reported a profit after tax of RM67mil for its financial year 2020 ended Dec 30 (FY20): six times higher than the RM10.52mil it reported in FY17.

In terms of revenue, the group posted RM1.32bil in FY20, more than double the RM573.39mil it recorded in FY17.

This gives it a profit after tax margin of 5%. The company has total assets of RM396.96mil.

An analyst points out that growth of the grocery market could soften in the coming months, as more economic activities resume and inflationary pressures set in.

Jaya Grocer is considered a premium grocery chain that sells mainly imported products.

In the past, there had been talk that the Teng family planned to list Jaya Grocer.

In March it was reported that PE firms, Carlyle Group and CVC Capital Partners were interested in buying a majority stake in Jaya Grocer at a deal which would have valued the latter at RM1bil.

Grab made its debut on the US Nasdaq market on Dec 2, via an injection into a special purpose acquisition company or SPAC. The Jaya Grocer deal was announced less than two weeks later, on Dec 13.

Grab’s listing on Nasdaq took place after a record US$40bil (RM169.12bil) merger with Altimeter Growth Corp SPAC, and raised US$4.5bil (RM19bil) in the deal.

Grab’s shares, however, had tumbled on their first day of trading by 20% from US$13.06 (RM55) to US$8.75 (RM37) apiece.

It has since fallen to US$7.25 (RM31) at press time.



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