Deals, deals, deals
Asia Tech Review: 14 September 2020
Welcome back,
It’s been a while hasn’t it… but what a week to return. Nvidia is buying Arm from SoftBank; Oracle is seemingly about to buy TikTok US; Reliance is loading up on private equity firms to fund its retail business the same way it did its digital services unit; and—last but not least—Grab and Gojek are reportedly back to talking about a merger deal, this time with SoftBank’s blessing.
All that and more is in this week’s email.
Until next time,
Jon
PS: We’re hiring for a reporter to join our lean and mean team at The Ken—must love writing deeply-researched business stories and be passionate about subscription media. Is that you, or someone you know? Drop me a line!
China
TikTok USA. What a mess. It looks like Oracle has won the battle to buy the service, which is said to have 100M users in the US, but there are a lot of caveats.
Let’s keep this simple:
It is reported that the Oracle deal will not include TikTok’s algorithm since China would need to approve a sale involving its technology
China is said to have been in favour of closing the service altogether
We don’t know who will run the service
The structure of an Oracle deal remains unclear, for example whether investors General Atlantic and Sequoia Capital are part of the buying consortium
It isn’t clear why Microsoft’s bid (with Walmart), a more logical bid, was rebuffed
Can a deal be struck by the 20 September deadline, which will apparently not move even though there have been talks to find an alternative option
Who knows what will happen this week…
China’s Semiconductor Manufacturing International Corp (SMIC) has denied its technology is used by the military after it was reported that the Trump administration is considering adding it to a trading blacklist. That didn’t stop its shares dropping over 20%, shaving off $6B in market cap.
A group of tech veterans, including former executives at Huawei and SMIC, plan to launch a “domestic replacement” fund to develop Chinese next giants of the future and aid those impacted by US sanctions
As Ant Group prepares to go public, China is ready to cap the rate for quick loans for consumer lending firms. That’s currently Ant’s biggest source of revenue. Still, big name investors are circling with Temasek and Saudi sovereign fund PIF said to be among those keen to buy into the IPO.
Huawei is raising money from staff through a virtual stock sale:
Earlier this year, the world’s largest telecommunications equipment vendor adopted a new rule on profit dividends that allows its employees to buy virtual shares worth 25 percent of their income from the past five years, the people said. Employees who have worked for more than five years are eligible for the new scheme, according to the people, who asked to remain anonymous because the information is not public.
Baidu is reportedly in talks to raise up to $2B over three years for a biotech startup that plans to use AI to discover new drugs and diagnose diseases—Baidu plans to remain the top shareholder. The company vision is the same as XtalPi, a company backed by Tencent and Google.
Delivery services Ele.me and Meituan have added longer wait times for deliveries to reduce stress on delivery fleets
Chinese internet users are turning to Github to post information about Covid away from the eyes of censors
Companies in China spent a record $4.3B on cloud services in the first half of 2020, up 70% from a year ago, according to estimates by research firm Canalys
China has its own initiative to counter the U.S. Clean Network from the Trump administration
China is urging Twitter to investigate after an account belonging to its ambassador to the UK liked an adult-related tweet… Twitter has not responded to requests for comment 🤔
Hong Kong
Hong Kong-based Baring Private Equity Asia is buying Virtusa, a US-based global IT services provider, for $2B in a deal that takes it private from the Nasdaq at a 27% premium on its share price
India
Reliance is at it again. Silver Lake also snapped up a 1.75% stake in Reliance Retail for $1B—It could soon be joined by fellow PE firms KKR. which is reportedly in talks to acquire a similar stake, and Carlyle Group, which is linked with a $2B investment. It’s even reported that Amazon has been offered a $20B allocation, much in the same way Facebook, Google and others joined Jio’s multi-billion dollar party round
Also in Reliance-land: the firm is said to be planning to roll out 100M low-end smartphones in the coming months to lure new customers 🔒
Byju’s raised $500M more led by PE firm Silver Lake
India is preparing new regulation to allow companies that are not listed domestically to list overseas—right now that isn’t the case. Although Reuters reports that the company must later list in India if they IPO overseas first.
Speaking of going public: Zomato has reportedly told investors that it plans to list in the first half of 2021. It just raised $100M and says the $250M it has in the bank is more than ever before
After PUBG was banned by the Indian government, PUBG Corp has stepped away from Tencent—the game’s publisher in India—and is now looking into new ways to publish the game and get unbanned. But, as I wrote, Tencent’s role is so deep that unbundling it is not easy
A different conundrum may exist for ByteDance, which has seen its TikTok service blocked. While a range of companies (believable and less believable) are bidding to buy TikTok’s US business, politics is a big reason why no white knight has appeared in India. Indeed, the fact the company is bleeding senior talent in India is proof of how tough the challenge is.
Online pharmacy 1MG is in talks to raise $100M to battle rivals, which now include Reliance and Amazon
Investment app Groww raised $30M
Ola’s electric branch plans to launch scooters from Etergo, a Dutch company it acquired, in Europe this year and Asia next year
India is reportedly set to green light $100B in mobile devices for export as it pushes hard to become a manufacturing hub. Applicants are said to have come from Samsung, Apple partners Foxconn, Pegatron and Wistron and local firms Karbonn and Lava.
StartupXseed Ventures has launched a $27M fund, its second, for early stage deals with deep tech startups
Telco Vodafone Idea is now just ‘Vi’
A look at Bollywood’s streaming opportunity
New rules could force social media influencers to ensure the veracity of endorsements and claims they make
Southeast Asia
Grab and Gojek are reported to have resumed merger talks after SoftBank, previously a critic of a proposed tie-up, gave its blessing to the union. The main sticking point looks to be what happens in Indonesia, the lone market where Grab isn’t clearly dominant, while there may also be antitrust concerns. Governments in Southeast Asia allowed Grab to consume Uber’s local operations and watched it become the supremely dominant player—will they allow the same again? Also as the FT points out, a merger could mean job losses which would not be welcome during pandemic.
Still, it’s business as usual with Grab reportedly looking to raise up to $500M for its financial arm—insurance firms Prudential and AIA are among the potential investors in discussion
Singapore’s privacy regulator has said Grab’s fourth data privacy breach is “a significant cause for concern”—Grab is among the bidders for a digital banking licence in Singapore
British insurance firm Aviva sold its Singapore business to a consortium led by Singapore Life for nearly $2B
China’s largest technology and financial services companies are reportedly stepping up efforts to expand in Singapore, as doors slamming shut on mainland groups in the US and India make the Asian finance hub crucial for international growth
Similar—and filed under ‘obvious but interesting’—ByteDance reportedly wants to make Singapore its “beachhead” for the rest of Asia. It does have a growing team there, which is HQ for its Lark productivity app and where it hopes to win a digital banking license to take it into financial services
Southeast Asia’s education startups are starting to show: Philippines-based Edukasyon raised undisclosed funding
Singapore-based food delivery app Oddle is reportedly trying to get sold. Bloomberg reports it has raised SG$5 million ($3.7 million) and is projecting an annual gross profit of SG$8 million for its current financial year.
Farm fresh e-commerce startup Freshket, which is based in Thailand, raised $3M
Cross border payments startup Thunes, which is active in Africa and Asia, closed $60M
P2P lending service Fvndit raised $30M
Zoom and Twitter are now among the services that must pay a 10% digital tax in Indonesia
Vietnam has a new fund: Do Ventures is targeting a $50M debut fund that invests from seed to Series B—its first close saw it reach $25M
Indonesia-based logistics business Waresix raised $100M
A report on influencer marketing in Southeast Asia during Covid
Japan
SoftBank has agreed to sell Arm Holdings to Nvidia for $40B.
First of all this is a huge deal for the semiconductor industry. Aside from being a record transaction for a chip firm—SoftBank’s $30B deal for Arm was years ago was the previous highest—it marries two powerful chip giants. Nvidia is the dominant supplier of graphics chips while Arm specialises in processors. That’s a powerful combination, even excluding their focus on areas like AI.
The deal is also a public evidence of SoftBank’s struggle to come good on the Vision Fund and its audacious goal to own the dominant tech players of tomorrow. As the FT reports, SoftBank’s profit on the deal is now Vision Fund rhetoric level:
The takeover values Arm above the $32bn price that SoftBank paid for the business in 2016, a deal that was struck weeks after the UK voted to leave the European Union and prompted critics including Arm’s founder to accuse the country of selling off the crown jewel of its tech sector.
While Nvidia is paying more for the asset than SoftBank did, the price also reflects the scale of Arm’s underperformance under the Japanese group’s ownership.
Nvidia had a market valuation of roughly similar to that of Arm’s at the time of the 2016 deal, but now trades with a market value of $300bn, or roughly 10 times the amount SoftBank paid in cash for Arm. By paying for a large portion of the deals with its own shares, it is also passing part of the risk of the transaction to SoftBank.
Indeed, a public investment would have been more lucrative:
More: SoftBank wants to burn money: Masayoshi Son zeros in on Japan, where he is ready to lose billions in a battle to conquer cash 🔒
A look at how M3, which helps pharma companies, doctors and patients access information online, has grown into a $39B business thanks to a boost from Covid. Sony owns one-third of the business and its founder has now become a billionaire on paper.
Japan’s subsidy plan for bringing manufacturing home has seen significant interest 🔒
US-based DNX Ventures, which focuses on early stage B2B deals, has a new $315M fund for Japan and the US
Nintendo is doubling down on the Switch again
South Korea
The Kakao Games IPO, which raised $323M, has soared to become the third-most valuable business on the Kosdaq market at $27B
Somewhat related, Korea’s top gaming firms are now increasing their focus on mobile having previously stuck to PC and console titles 🔒
Samsung has landed one of its largest 5G network deals to date with a $5.5B contract with Verizon
Like Japan, South Korea also has subsidies to lure companies with operations overseas back to the country but it is struggling to have impact
Outside of Asia tech
Australian reporters flee China after diplomatic stand-off link
When Learning Is Really Remote: Students Climb Trees and Travel Miles for a Cell Signal link
A profile of Google CEO Sundar Pichai: Google’s Sundar Pichai Is a Really Nice Guy. Is That Enough? The low-key chief is contending with possible antitrust lawsuits, a revenue drop and pressure to take the company in new directions link
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