Via Financial Times

Europe’s Delivery Hero has expanded its footprint in Asia with a $4bn buyout of a South Korean start-up, in a move that ratchets up competition in the region’s online food delivery market. 

The Berlin-headquartered group signed a deal in Seoul on Friday to take over Woowa Brothers, the company behind South Korea’s most popular food delivery app.

“Cut-throat competition against companies with large [amounts of] capital will eventually lead to co-destruction. So, we decided to partner with Delivery Hero,” said Bong Jin Kim, Woowa Brothers’ founder. 

The South Korean group owns Baedal Minjok, an app more commonly known as Baemin.

Delivery Hero, one of the world’s largest online food delivery groups, will pay $3.48bn for the 87 per cent of the Seoul-based company that is owned by outside investors. The deal values Woowa Brothers at $4bn. 


The number of active Baemin users in South Korea

The remaining 13 per cent stake — valued at $520m — held by Woowa Brothers’ senior management will be converted into shares of Delivery Hero, a move that makes Mr Kim the largest individual shareholder among Delivery Hero management.

The investment intensifies the rivalry between the German group and the region’s big incumbents, including SoftBank-backed Grab and Indonesia’s Go-Jek. It comes as growth in south-east Asia, with 655m people, spurs rapid uptake of app-based services. 

The deal means Mr Kim will manage Delivery Hero’s business across Asia, including the 11 countries the company already has a presence in, as well as Woowa’s existing operations in South Korea and Vietnam.

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There are more than 10m active Baemin users in Korea, but Woowa has faced rising competition from SoftBank-backed Coupang.

The deal also marked the biggest merger and acquisition deal involving a South Korean internet group, the company said. A potential $15bn sale of South Korean gaming group Nexon collapsed earlier this year.

Food delivery has become a critical pillar for tech players in south-east Asia keen to tap a nascent industry in the region that can offer higher margins than their other main businesses, such as ride-hailing and digital payments. According to Euromonitor estimates, Asia Pacific will account for half the $221bn global expenditure on online food delivery in 2019.

While the takeover marks the latest multibillion-dollar valuation in the online food marketplace, companies in the sector face an increasingly crowded market

US-based Grubhub has seen its share price plunge this year amid challenges from new entrants. and Just Eat, which have been in talks over a potential £9bn merger, have both seen their profits take a hit this year.

The Woowa takeover saw a group of international backers exit including China’s Hillhouse Capital Group, US-based Altos Ventures, Goldman Sachs and Sequoia Capital, and GIC, the Singaporean sovereign wealth fund. 

The combined group will also establish a $50m fund to support South Korean food technology ventures expanding into new markets.

Cho Yong-sun, an analyst at SK Securities, said the takeover will help Delivery Hero grow its presence in Asia, but he cautioned the deal could still face hurdles from South Korean competition regulators as the new entity’s combined market share in local food deliveries operators will be more than 90 per cent.

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Additional reporting by Kang Buseong and Song Jung-a