By Kim Yoo-chul
A senior ruling party lawmaker hinted at the possibility of nullifying Delivery Hero's $4 billion acquisition of Woowa Brothers if it fails to clarify detailed plans on how to guarantee fair market competition covering “multiple aspects.”
“The ruling Democratic Party of Korea (DPK) is communicating with presidential aides about addressing the possible negative aspects of the recently proposed acquisition deal between Delivery Hero and Woowa Brothers. The DPK is also talking to the Fair Trade Commission on the matter. We don't want to think about the worst case scenario but we didn't rule out the possibility,” the lawmaker told The Korea Times.
Woowa Brothers has been one of the fastest growing online food delivery service providers in Korea, with over 30 million orders per month. From a business standpoint, the deal does make sense as the acquisition, if completed, will strengthen the capabilities of both companies which are already facing a steep rise in competitors such as Uber Eats and Coupang Eats.
For investors, a foreign merger also dissolves the growing pressure of putting out an initial public offering (IPO) local market for Woowa Brothers. The country's top anti-trust regulator considered to grant a “conditional approval” for Delivery Hero's multi-billion dollar acquisition proposal. However, Woowa's initial proposals to grow a relevant eco-system with local SMEs apparently “failed to impress,” according to the lawmaker.
“We understand the beauty of acquisition deals. Yes, the DPK also welcomes any ideas of revitalizing acquisition deals. But as the ruling party which has no options but to find measures for how to protect the best interests of local SMEs, if the acquisition deal raises monopoly and other issues affecting the relevant local eco-system, we have to think about next steps,” the lawmaker added.
Ahead of the crucial April nationwide election, Cheong Wa Dae and the ruling party are on track to develop a set of various policy ideas that could appeal to voters. Since President Moon took power in 2017, he himself has been stressing the validity of “fairness” and “fair market competition.”
The anti-trust regulator was reviewing similar cases to analyze the combined entity's estimated impact on the market. Woowa Brothers owns Baedal Minjok (Baemin). Delivery Hero is one of the world's top online food delivery groups. It plans to pay $3.48 billion for an 87 percent share of the South Korean company, which is also part-owned by non-Korean investors.
The acquisition proposal has raised concerns over a possible delivery monopoly. According to the Korea Franchise Association, Baemin has a 55.7 percent market share, followed by Yogiyo with 33.5 percent and Baedaltong with 10.8 percent. The latter two are subsidiaries of Delivery Hero.
SMEs' anger is further deepening after local reports said there is no contract clause in the stock sale agreement preventing Delivery Hero from raising commissions or advertising fees. Woowa Brothers earlier said it plans to lower the commission fee from 6.8 percent to 5.8 percent from May this year.