Daily Management Review

South Korean Regulators Approve $4 Billion Woowa Acquisition By Delivery Hero But With Conditions


South Korean Regulators Approve $4 Billion Woowa Acquisition By Delivery Hero But With Conditions
The $4 billion takeover of top South Korean food delivery app owner Woowa Brothers by Germany's Delivery Hero has been approved with the condition that the German company will have to divest its South Korean food delivery app Yogiyo.
This approval and the sale of Yogiyo will mean Delivery Hero being able to clear a major hurdle to establishing a dominant position in the third largest online food delivery market of the world with increasing demand for food delivery because of the novel coronavirus pandemic.
Last year, Delivery Hero agreed to acquire Woowa in a buyout and the deal now is being viewed as a lifelibe for the company in market that is intensely competitive.
After the news of the regulatory approval, shares of Delivery Hero rose by 3.6 per cent. The3 German company also expects to close the deal in the first quarter of next year, according to a regulatory filing by it.
"We are deeply saddened by the required condition to divest Delivery Hero's subsidiary," Chief Executive and co-founder Niklas Östberg said in the statement, while welcoming the regulatory approval. "We... will work hard to ensure that this transition is as smooth as possible for all impacted employees."
The acquisition deal will be approved but with the condition that Delivery Hero sells off its entire stake in the food delivery app Yogiyo, the second largest in the South Korean market, within six months, allowing for an extension for the sale, the  Korea Fair Trade Commission (KFTC) said on Monday.
KFTC chief Joh Sung-wook said that concerns about dines ending up paying more under the current deal would be eased by the sale while it would also result in Delivery Hero achieving synergy, which had been cited by the German firm as the reason for the acquisition.
"Delivery Hero said the purpose of this deal is to combine its logistics technology and Woowa's marketing ability, and I think this is sufficiently possible," she told a briefing.
About 97 per cent of the country’s food delivery transactions would be owned by the combined entity that would have been created from acquisition and if the sale was not conducted by July best year. KFTC said.
According to mobile big data platform IGAWorks, as of November this year, there were about 15.8 million monthly active users of Woowa's number 1 app even without Yogiyo. That was about 82 per cent of all the monthly active users in South Kores of all food delivery apps.
According to Euromonitor data, the food delivery market of South Korea is the third largest in the world – trailing that of China and the United States. The market is expected to clock a 40 per cent growth this year and achieve a total value of about $15.4 billion.
The very fast spread of Coupang Eats, a rival food delivery service launched in April 2019 by the e-commerce firm Coupang which is backed by SoftBank is testimony to the growing market competition.