Singapore's PropertyGuru sets its sights on mergers and acquisitions after its planned SPAC listing
- PropertyGuru — which operates in Singapore, Malaysia, Thailand, Vietnam and Indonesia — announced plans in July to go public through a SPAC merger with Bridgetown 2 Holdings.
- It is a blank-check company backed by billionaires Richard Li and Peter Thiel.
- The combined company is set to have a market value of around $1.78 billion.
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Southeast Asia's online real estate company PropertyGuru plans to use proceeds from its public market debut next year for mergers and acquisitions, its CEO Hari V. Krishnan told CNBC.
The start-up — which operates in Singapore, Malaysia, Thailand, Vietnam and Indonesia — announced plans in July to go public through a SPAC merger with Bridgetown 2 Holdings, a blank-check company backed by billionaires Richard Li and Peter Thiel.
SPACs — or special purpose acquisition companies — raise capital from public markets and use that cash to merge with a private company, with the goal of taking the company public within a two-year period.
The combined company from the merger between Bridgetown 2 and PropertyGuru is set to have a market value of around $1.78 billion, according to the company. The deal includes $100 million of private placement from investment management firms like the UK's Baillie Gifford and Naya Capital, Australia's REA Group, New York-based Akaris Global Partners as well as one of Malaysia's largest asset managers.
"That money that will be on the balance sheet at the end of this business combination agreement will be very much towards M&A," Krishnan told CNBC in an interview last week. "And I would say largely focused on data, software, home services and fintech."
In August, PropertyGuru acquired REA Group's Malaysia and Thailand property portal businesses.
Krishnan ruled out any immediate plans to expand into other markets.
The deal with Bridgetown 2 is waiting for regulatory approvals from the U.S. Securities and Exchange Commission. Krishnan predicted PropertyGuru could trade on the New York Stock Exchange near the tail end of the January-March quarter once the deal is completed.
Bridgetown 2 Holdings shares are down more than 23% since its market debut in January.
Why through a SPAC?
PropertyGuru considered all options and all stock exchanges before inking the deal with Bridgetown 2, which included looking at trying for a traditional IPO again, Krishnan said.
In 2019, the Singapore head-quartered company scrapped plans for an initial public offering on the Australian securities exchange because "market conditions were not ideal." With Bridgetown 2, it was more about finding the right partner, according to Krishnan.
"We were not sure that we would go to the U.S., we weren't locked in on SPAC as the model, it became much more about where do we maximize the opportunity, where do we maximize the potential to share our story with worthy investors?" he said.
SPACs have steadily been attracting interest in Asia.
While private companies see them as a non-traditional way to access the capital market, a growing number of Asia-based sponsors are also backing those blank-check entities.
Grab, one of Southeast Asia's most prominent start-ups, started trading as a publicly listed company on the Nasdaq on Dec. 2, after it merged with the blank-check company, Altimeter Growth Corp. Shares tumbled on the first day of post-merger trading and are down 45% since then.
Data from Wolfe Research suggests there are over 400 SPACs actively looking for target companies. Southeast Asia's late-stage start-ups have been attracting a growing interest from those blank-check firms.
Overcoming investor scrutiny
PropertyGuru's "tried-and-tested" business model, its 14-year history, and the company's economic fundamentals will be able to stand up to investor scrutiny once it trades in the public market, according to Krishnan.
"I think that separates us from a lot of other companies that have gone public either through the SPAC route or who are from our part of the world," he said, adding that the business has a comparatively conservative market valuation than its listed peers.
"We feel we're a compelling investment and obviously, time will tell whether investors agree," Krishnan said.
PropertyGuru's existing backers include global investment firms TPG Capital and KKR.
In a regulatory filing, the company reported a net loss of 14.4 million Singapore dollars (about $10.56 million) last year and a net loss of 38.5 million Singapore dollars in 2019.
For the six months ending in June, PropertyGuru reported a net loss of 150.6 million Singapore dollars and attributed most of it to fair value loss on preference share conversion options. The company said that as those preference shares have been converted to ordinary shares, such fair value losses "are not expected in future periods."
It also reported a near 18% jump in revenue to 42.9 million Singapore dollars for the same period.
The coronavirus pandemic is a major headwind for the company and 2020 was a challenging year, Krishnan said. That was despite sky-high property prices in Singapore, one of PropertyGuru's major markets.
But the company is betting on a few key, long-term macroeconomic trends in Southeast Asia — such as urbanization, digitization, and the emergence of the middle class. "Those are trends that are not going to change. They can be paused, but they cannot be stopped," Krishnan said.
PropertyGuru has been expanding beyond property marketplaces, and into fintech and data software services, with an overall total addressable market at roughly $8 billion, he added.
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