Delivery Hero’s hopes of rapid expansion in Asia has hit a speed bump after South Korean antitrust regulators ruled a $4bn local takeover could only go ahead if the German group sold its existing business in the country.
The Berlin-headquartered food delivery business a year ago announced the acquisition of Woowa Brothers, which owns Baedal Minjok — more commonly known as Baemin — South Korea’s most popular food delivery app.
But the deal raised competition concerns because it would leave Delivery Hero — which already owns Baemin’s main rival, Yogiyo — with control of as much as 90 per cent of South Korea’s online food delivery market.
The Korea Fair Trade Commission on Monday approved the takeover on the condition that Delivery Hero divests from Yogiyo.
“There is a high concern that the proposed takeover could limit competition as it would have a far-reaching impact on various stakeholders of multi-faceted markets linked to delivery app platforms, such as restaurants, consumers and delivery workers,” the regulator said in a statement.
Delivery Hero did not immediately respond to requests for comment. Woowa declined to comment.
The amount Delivery Hero will pay for 87% of Woowa owned by outside investors
The planned takeover of Woowa is a big part of Delivery Hero’s expansion plans in Asia, where it faces competitors such as Indonesia’s Gojek, Singapore-based and SoftBank-backed Grab and Uber Eats. Woowa Brothers’ founder Kim Bong-jin would run the German group’s Asia business under the takeover plan.
In an August interview with the Financial Times, Delivery Hero chief executive Niklas Ostberg sought to allay antitrust concerns over the deal. He said that South Korea’s broader ecommerce market would benefit from more competition for popular online platforms such as SoftBank-backed Coupang, Kakao and Naver.
Approval of the deal was also complicated this year when Baemin faced criticism from small businesses and South Korean politicians for attempting to raise commission fees for restaurateurs.
If the takeover proceeds, it would mark one of South Korea’s biggest acquisitions involving an internet group.
Delivery Hero would pay $3.48bn for the 87 per cent of the Seoul-based Woowa, which is owned by venture and institutional investors including Hillhouse Capital, Altos Ventures, Goldman Sachs, Sequoia Capital and GIC, the Singaporean sovereign wealth fund. The remaining 13 per cent stake, which is valued at $520m and held by Woowa senior management, will be converted into shares of Delivery Hero.
The KFTC decision has also highlighted the thorny landscape facing antitrust regulators as they grapple not only with the rising dominance of global tech groups such as Google, Amazon and Alibaba, but also the creation of new monopolies in emerging sectors such as food delivery.