Korea set to approve $4 billion Delivery Hero-Woowa Brothers deal
A Baedal Minjok (Baemin) food delivery rider in Yeouido, southwestern Seoul, Thursday. Yonhap
By Kim Yoo-chul
Korea's top antitrust regulator is “very close” to approving German food delivery application operator Delivery Hero's $4 billion plan to acquire Woowa Brothers, which operates Korea's top food delivery application, sources told The Korea Times, Thursday.
“As far as I know, the Fair Trade Commission's (FTC) committee reviewing the German company's suggested acquisition deal reached consensus that the merged entity won't hurt fair competition in Korea if the entity moves forward with its business outside the country and not in it,” an official said on condition of anonymity.
A final decision regarding the acquisition plan, which has been pending for more than a year, could be announced sometime early next week. The FTC's review committee held a session on Dec. 23, but no official decision has yet been made.
The FTC declined to comment, while officials at Woowa Brothers said the review committee was briefed on the specifics of the new business plans once the acquisition deal is approved.
“We can't say more about the matter and share details our executives shared with the FTC review committee members because of confidentiality,” the officials said.
A year ago, Delivery Hero agreed to a $4 billion deal to purchase Woowa Brothers, with the aim of ratcheting up consolidation in the booming industry as it seeks to expand in Asia.
The key rationale for the approval's delay is that the merged entity could hurt fair competition in Korea, as the approval would help the merged unit possibly dominate the local food delivery application market, hurting the best interests of consumers, FTC officials said.
At the time of the merger announcement, Delivery Hero and Woowa Brothers said the acquisition is mostly aimed at expanding the combined entity's presence in Asia and Europe because Korea's food delivery application market is crowded.
Investors and analysts said Delivery Hero and Woowa Brothers could expand their business in Southeast Asia, but the merged entity, if the FTC approves it, would be asked to move forward with more detailed localized business strategies to increase its chances of success in other markets it has been eyeing.
“It's true that the FTC asked Delivery Hero to unload its major stakes in Yogiyo, the country's No. 2 food delivery application operator, in return for getting an approval,” an official said. “But Delivery Hero refused to accept this. Now, Delivery Hero and Woowa Brothers recently submitted their updated business plans to the FTC's review committee. Some of the updates included are the merged entity's commitment to apply business growth strategies for foreign markets.”
Woowa Brothers operates Korea's top food delivery application ― Baedal Minjok (Baemin).
Delivery Hero CEO Niklas Oestberg told analysts recently that he was expecting “no major antitrust challenges” to the deal, citing keen rivalry among existing players including Coupang.
“The acquisition of Gmarket by Auction back in 2009 raised the same antitrust issue, as Gmarket was the top player in the open market, followed by Auction,” another official said. “However, the rise of Coupang and Naver broke down their position."
Delivery Hero and Woowa Brothers plan to advance into 11 Asian markets with financial backing from investors, according to official, who added its app and other Delivery Hero-held apps would be run independently even after the merger. Woowa's top investors include Goldman Sachs, Singapore fund GIC, Hillhouse Capital and Sequoia Capital.