Indonesian ride-hailing and payments firm Gojek and e-commerce leader Tokopedia are in advanced talks to seal a $18 billion merger ahead of a potential dual listing in Jakarta and the United States, people with knowledge of the matter said on Tuesday. A deal, which would be the biggest yet for Indonesia, could transform the landscape in the country’s e-commerce market, whose growth has accelerated as stay-at-home pandemic restrictions have stoked demand for food delivery and e-payments. Bigger rivals in the space include Southeast Asian ride-hailing, food delivery and e-payments firm Grab, and Singapore-based regional internet company Sea Ltd, which commands a market value of $100 billion and operates e-commerce platform Shopee. As a merged company, decade-old start-ups, Gojek and Tokopedia would seek to expand market share and pursue profitability by offering services, such as grocery shopping and courier services from a single platform. “An international listing for a regional internet group will showcase that Southeast Asia isn’t a one-hit wonder. It’ll pave the way for global growth and exits for several other high-growth startups from the region,” said Varun Mittal, head of emerging markets fintech business at E&Y. Common investors in the pair, which are Indonesia’s most valuable start-ups, include Temasek Holdings Pte Ltd, Sequoia Capital and Google. Alibaba Group Holding Ltd and SoftBank Group Corp are among Tokopedia’s investors, while Gojek’s include Warburg Pincus LLC and Tencent Holdings Ltd. Three of the people with direct knowledge of the matter said Gojek and Tokopedia in late December agreed to conduct due diligence of each other’s business. The founders and some senior executives of Gojek and Tokopedia have been friends for the last decade and aim to finalise a deal in the first half, the people said. “These are amicable conversations between mutually trusted partners. The broad terms are largely agreed,” said one person. Talks between the companies started in 2018, two people said. Negotiations gathered momentum in November last year after months of merger talks between Gojek and Grab faltered, they said. To finalise a deal, Gojek and Tokopedia need to thrash out merger ratios and seek approval from their boards. The people said Gojek was last valued at just over $10 billion and Tokopedia at around $7 billion. The combined entity would figure in the top 10 Indonesian companies by market value and become one of the largest Southeast Asian tech companies. All the sources declined to be identified as the talks were private. Gojek, Tokopedia and Grab declined to comment. BATTLEGROUND INDONESIA A listing of the combined businesses could raise as much as $2 billion, two people said, in what could be one of the biggest IPOs by an Indonesian company. Reuters reported last month that Tokopedia received a merger approach from a blank-cheque acquisition firm. Tokopedia had said an indirect listing via a special purpose acquisition company was an option. Gojek and Grab are both seeking to become one-stop shops for ride-hailing, food delivery and payments. Tokopedia is a marketplace which, unlike most of its rivals, does not hold its own inventory. Southeast Asia, with a population of about 650 million, expects to see its internet economy grow to $300 billion from an estimated $100 billion last year. “In order to truly compete against Sea, Gojek and Tokopedia would have to demonstrate that they are more than an Indonesian business,” said Joel Shen, a technology lawyer at Withers. “On the other hand, Gojek and Tokopedia are seen as homegrown tech champions. For this reason, a merger would appeal more strongly to the nationalistic sentiments of Indonesian investors and regulators alike.” Gojek has expanded in countries including Singapore and Vietnam, while Tokopedia’s Indonesian marketplace has more than 100 million monthly active users. Bloomberg News earlier reported merger talks between Gojek and Tokopedia.