Delivery Hero’s hopes for rapid expansion in Asia slowed down after South Korean antitrust regulators ruled a $ 4 billion local takeover could only materialize if the German group sold its existing business in the country.
A year ago, the Berlin-based food delivery company announced the acquisition of Woowa Brothers, which owns Baedal Minjok – better known as Baemin – South Korea’s most popular food delivery app.
But the deal raised competition concerns as it would leave Delivery Hero – which already owns Baemin’s main rival, Yogiyo – to control as much as 90% of South Korea’s online food delivery market.
The Korean Fair Trade Commission on Monday approved the buyout on the condition that Delivery Hero move out of Yogiyo.
“There are strong concerns that the proposed takeover may limit competition as it would have a significant impact on various stakeholders in multi-faceted markets related to delivery application platforms, such as restaurants, consumers and delivery people,” the regulator said in a statement.
Delivery Hero did not immediately respond to requests for comment. Woowa declined to comment.
$ 3.48 billion
The amount that Delivery Hero will pay for 87% of Woowa owned by outside investors
Woowa’s planned revival is a big part of Delivery Hero’s expansion plans in Asia, where it faces competitors such as Gojek in Indonesia, Grab and Uber Eats, based in Singapore and backed by SoftBank. Woowa Brothers founder Kim Bong-jin is reportedly leading the German group’s Asia business as part of the takeover plan.
In August interview With the Financial Times, Delivery Hero chief executive Niklas Ostberg sought to allay antitrust concerns over the deal. He said South Korea’s larger e-commerce market would benefit from increased competition for popular online platforms such as Coupang, Kakao and Naver, backed by SoftBank.
Approval of the deal was also complicated this year when Baemin faced criticism from small businesses and South Korean politicians for trying to increase restaurant owners’ commissions.
If the buyout continues, it would mark one of South Korea’s biggest acquisitions involving an internet group.
Delivery Hero reportedly pays $ 3.48 billion for 87% of Seoul-based Woowa, which is owned by venture capital and institutional investors including Hillhouse Capital, Altos Ventures, Goldman Sachs, Sequoia Capital and GIC, the sovereign wealth fund Singaporean. The remaining 13% stake, valued at $ 520 million and held by senior management of Woowa, will be converted into shares of Delivery Hero.
The KFTC ruling also highlighted the thorny landscape that antitrust regulators face as they don’t just face growing dominance global technology groups such as Google, Amazon and Alibaba, but also the creation of new monopolies in emerging sectors such as food delivery.