Conditions of the antitrust authorities: Delivery Hero swaps subsidiaries in South Korea

Monday 28 December 2020

Requirements of the antitrust authorities
Delivery Hero swaps daughters in South Korea

South Korea is considered one of the largest and fastest growing markets for food delivery companies. The Dax company Delivery Hero wants to benefit from this and is reaching for the market leader. The market supervisors oblige the Berliners to hand over the number two again.

The food delivery service Delivery Hero has to part with its own subsidiary in the Asian country for a multi-billion dollar takeover in South Korea. The competition authority in Seoul is asking Delivery Hero to sell Yogiyo, the number two food delivery company in South Korea. Otherwise, the 3.6 billion euro takeover of market leader Woowa by Delivery Hero threatens a quasi-monopoly, the Korea Fair Trade Commission (KFTC) justified the decision.

The founder and boss of the Berlin company, Niklas Östberg, had long resisted the requirement, but has now given in. The approval is "great news" for the entire industry, although he is "deeply saddened" by the sale of Yogiyo.

With annual sales of $ 15.4 billion and growth of 40 percent, South Korea is the third largest market for food delivery services worldwide. The high population density and an increasing number of single households make it attractive for providers.

At the stock exchange there was great sigh of relief over the approval, which had dragged on for more than a year. The share, which has meanwhile risen to the leading index Dax, jumped by more than seven percent. This could also affect the financing of the takeover. Because when Delivery Hero and the previous owners of Woowa Brothers agreed the takeover in mid-December 2019, the share was just under 50 euros.

At that time it was said that Delivery Hero would pay 1.7 billion euros in cash, the rest in 40 million own shares. The ratio could change as a result of the course jump, said a spokeswoman. Delivery Hero expects the takeover to be on the dry side by the end of March.

Eight out of ten Koreans use Woowa

The company has at least six months to sell its own national company in South Korea – counting from the day on which the official notification from the KFTC is received. With immediate effect, Delivery Hero is not allowed to do anything to reduce the value of Yogiyo – for example, change the commissions for the restaurants or poach drivers for Woowa.

82 percent of all customers of online food delivery services in South Korea use the Woowa app. Delivery Hero and Woowa's joint plans extend far beyond South Korea. The business of both delivery services in Asia is to be bundled in a joint venture in Singapore.

Delivery Hero is active on the continent under the brand "foodpanda". The joint holding is to be managed by Woowa founder Bongjin Kim, Jakob Angele from Delivery Hero and Sean Oh from Woowa are to take care of the respective brands.

The food delivery industry is in the middle of a consolidation. Delivery Hero said goodbye to Germany long ago. Their brands like "Lieferheld" have merged with their competitor Lieferando, which belongs to the merged British-Dutch company Just Eat Takeaway.