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Delivery Hero Must Sell Yogiyo for Korean Merger Approval

South Korean anti-trust regulatory – The Korea Fair Trade Commission – conditionally approved a US$ 4 billion deal for Delivery Hero (ETR: DHER) to acquire BAEMIN’s operator – Woowa Brothers.

The Korea Fair Trade Commission granted the takeover’s permission to Delivery Hero’s condition to sell all its stock share of Yogiyo, the No.2 food delivery platform in South Korea.

Our team reported last month that The Security General of the Fair-Trade Commission (“FTC”) expressed its opinion as a structural measure needed on the Delivery Hero’s M&A between Baedal Minjok and Yogiyo.

1. Why did KFTC approve the merger with conditions?

There have been strong critics regarding the market monopoly and distortion in the competition if the M&A has been approved without any condition.

The South Korean food delivery applications’ market size was estimated at around KRW 10 trillion (US$ 9.1 billion) in 2019.

Due to the COVID-19 pandemic and social quarantine and distancing, the market size is expected to explode as more people are frustrated to go out dining due to the concerns in the infection risk.

According to Nielsen Koreanclick, the number of average monthly users of BAEMIN (by Woowa Brothers) topped 13 million. Yogiyo (by Delivery Hero Korea) followed the BAEMIN with 6.6 million users.

The board had agreed with the Security Generals’ opinion that the M&A would cause delivery fee discount avoidance and fewer discount programs that competition shall bring.

2. The opinion of Delivery Hero.

“We are deeply saddened by the required condition to divest Delivery Hero’s subsidiary Delivery Hero Korea in South Korea.”Niklas Östberg, CEO and Co-Founder of Delivery Hero

Niklas expressed his feelings via a press release from Berlin. With his sense, Delivery Hero announced that a joint venture would be established in Singapore to manage the foodpanda operations of the Delivery Hero Group and Woowa entities in Asia as planned within Q1 2021.

The timeframe given for the divestment is six months from the date on which Delivery Hero will receive the written decision from KFTC.

Delivery Hero mentioned in its press release that the company could request an extension of the sale period for up to six months under certain circumstances. 

3. What is next?

There was some news from Seoul that the decision by KFTC would be a trigger as a deal-breaker, but it did not happen.

The current CEO& Founder of Woowa, Bongjin Kim, will be appointed Chairman of the Board and Executive Director of the joint venture.

Jakob Angele, current CEO of Foodpanda Asia, and Sean Oh, current CFO/CSO of Woowa, will be appointed Co-CEOs of the joint venture, taking care of the Foodpanda Woowa business units, respectively.

The joint venture will cover all Delivery Hero verticals of foodpanda and Woowa, such as own delivery, cloud kitchens, and quick commerce, including Dmarts in Asia.