December 28, 2020
By Joyce Lee
SEOUL (Reuters) – South Korea’s antitrust regulator said on Monday Delivery Hero must sell its Yogiyo subsidiary to win approval for a $4 billion takeover of Woowa Brothers that would have given it a near monopoly in the country’s food delivery market.
The ruling from the Korea Fair Trade Commission (KFTC) is a setback for consolidation in the world’s third-largest online food delivery market, although it was not immediately clear if it will scupper the deal as the market dominance of Woowa’s No. 1 app is significant even without the subsidiary.
Berlin-based Delivery Hero agreed last year to buy Korea’s top food delivery app owner Woowa as it expands in Asia’s fast-growing but crowded market. For Woowa, the buyout is a lifeline in an intensely competitive market.
But the KFTC said it would only approve the takeover if Delivery Hero sold its entire stake in the country’s No. 2 food delivery app Yogiyo in six months, with possible extensions.
The unit sale would ease concerns that diners would end up paying more under the current deal, while allowing the synergy that Delivery Hero cited as the reason for the acquisition, KFTC chairperson Joh Sung-wook told a briefing.
“Since Delivery Hero said the purpose of this deal is to combine its logistics technology and Woowa’s marketing ability, and I think this is sufficiently possible … I expect they’ll accept this conditional approval,” she said.
KFTC said the combined market share of the entity resulting from the takeover, if the unit was not sold, would be 97% of food delivery transactions as of July.
Even if Delivery Hero sold Yogiyo, Woowa’s No.1 app had about 15.8 million monthly active users as of November, or 82% of all food delivery apps’ monthly active users in South Korea, according to mobile big data platform IGAWorks.
A Seoul-based spokeswoman for Delivery Hero declined immediate comment.
Critics say the regulator is ignoring the food delivery market’s rapidly changing conditions and multinational competition, including the growth of Coupang Eats, a rival service by SoftBank-backed e-commerce firm Coupang.
Since launching in April 2019, Coupang Eats has spread in the Seoul region to rank third in monthly active users as of November after Woowa’s app and Yogiyo, according to IGAWorks.
The regulator said there was insufficient evidence Coupang Eats was a nationwide threat to Delivery Hero-Woowa.
South Korea’s food delivery market ranks third after China’s and the United States’, Euromonitor data showed, and is expected to grow 40% this year to about $15.4 billion.
(Reporting by Joyce Lee; Editing by Stephen Coates)
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