On Saturday (April 22), it was announced that SMRT, Singapore’s third largest taxi company, is in talks to sell its taxi business to Grab.
If successful, the deal will see SMRT exiting the business after a long 27 years. The proposal also bids for SMRT to have a stake in Grab, and at least one seat on its board of directors.
This particular offer by Grab has apparently sparked the interest of another bidder which is looking to enhance its presence in Singapore.
Prime, Singapore’s smallest taxi operator – with a fleet of 704 as at end-February – is keen to ‘grab’ SMRT’s taxi arm too.
According to The Straits Times, Prime chairman Neo Nam Heng said, “We’re definitely interested, but the question is how much they are willing to sell at. When we bought their (SMRT’s) car rental business, it was making losses. By the second year, we made it profitable.”
He was referring to Prime’s $13.5 million purchase of Tibs Leasing from SMRT in 2003.
SMRT’s taxi business was established in 1990, and it has largely been unprofitable since. The business only began to make progress in recent years.
Previously, Grab had made a similar offer to buy its taxi business some time last year, but Prime refused to sell because it wanted to work on growing its business instead.
SMRT And Grab’s “Good Partnership”
Commenting on the sale, SMRT chief executive Desmond Kuek told The Straits Times: “We have a very good partnership with Grab, with Strides, our private-hire services, as well as our taxi business. And we continue to look for all kinds of ways to partner and cooperate with them.”
SMRT’s talks with Grab – which supposedly include its Strides private-hire and Bus Plus premium bus operations – will depend on whether or not the latter is willing to hire all affected employees.
SMRT, fully owned by the government’s Temasek Holdings, wants the buyer to ensure all affected workers to retain their jobs. However, Grab is not keen on this as it has its own staff – and this seems to be the only issue that’s obstructing the sale.
Otherwise, I would say that Grab is in a very good position to win the tender.
Trans Cab, the second-largest cab operator here, also showed its support for Grab. Trans Cab managing director Teo Kiang Ang said that although Grab is relatively new, it is “more familiar with the taxi industry and issues faced by the cabbies.”
With Prime and Grab rivalling for the tender, it feels like a case of David and Goliath – Singapore’s smallest taxi operator versus Singapore’s dominant player in the ride-hailing app market.
Nonetheless, the cab industry in Singapore is naturally unstable with the presence of more than one major player so as such, a consolidation is inevitable, and possibly even necessary.
Featured Image Credit: Skyscrapercity.com