Uber, Naver show interest in taking over Baedal Minjok

Woowa Brothers' delivery trucks operate in Busan, Saturday. Courtesy of Woowa Brothers

Woowa Brothers, the operator behind Korea's largest food delivery platform Baedal Minjok, is now for sale as German parent firm Delivery Hero has begun restructuring its portfolio.

Most speculation over potential buyers has pointed towards a consortium between Uber, which owns and operates Uber Eats global food and grocery delivery business, and Naver, the largest local online portal and major e-commerce shopping platform.

According to industry officials on Monday, Delivery Hero appointed JPMorgan Chase earlier this month as lead manager for the sale of Woowa Brothers, and has distributed teaser materials to major strategic investors and private equity firms.

The estimated price for Woowa Brothers is 8 trillion won ($5.8 billion), roughly double the price that Delivery Hero paid when it acquired the company in 2019.

Among the various companies mentioned as potential buyers, Uber and Naver are considered the most likely candidates. Given the hefty price tag, speculation has also emerged that the two companies may form a consortium, although Naver said it is reviewing various options and nothing has been decided at this stage.

Uber is also Delivery Hero’s largest shareholder. After acquiring 7 percent of Delivery Hero stocks through global investor Prosus last month, Uber purchased additional shares in Delivery Hero to claim 19.5 percent of the German company's stake in total. Uber also has a call option for 5.6 percent, leaving it able to lift its holdings to over 25 percent.

This structure, however, may raise questions over the fairness of the sale, as it could appear as though Uber is effectively selling the company to itself. This may stir controversy over the transparency of the deal, particularly over the acquisition price.

Uber withdrew Uber Eats from Korea in 2019, but if it acquires Woowa Brothers through a consortium with Naver, the deal could trigger monopoly concerns due to Naver’s dominant position in Korea’s mobile ecosystem.

Because such a structure would likely require approval from the Fair Trade Commission, rumors speculate that the consortium may seek to keep Naver’s stake below 20 percent to avoid controversy.

In this file photo from Nov. 6, 2019, a restaurant advertises Uber Eats in Coconut Grove, Miami, Fla. AP-Yonhap

Nevertheless, Naver and Uber continue to be mentioned as likely partners because the deal would allow Uber to instantly overcome its limited presence in the Korean market by acquiring a leading platform, while Naver could add a powerful food service to its e-commerce ecosystem.

Market watchers speculated that if Naver takes over Woowa Brothers, there is a strong likelihood for Baedal Minjok to link up with Naver's online ecosystem including its search, map, payment and membership platforms.

“If it takes place, it would create a seamless loop where users search for a place to eat on Naver, look up the location and reviews on Naver Maps, checkout using Naver Pay and get their meal delivered via Baedal Minjok,” an industry official said.

The expansion will allow Naver to lock horns with Coupang, the country's largest e-commerce firm, which operates the country’s second-largest food-ordering platform, Coupang Eats. Currently promoting a free delivery service which has previously been limited to members of Coupang’s paid Wow program, Coupang Eats has geared up to challenge Baedal Minjok.

Chinese e-commerce firms operating platforms here, including AliExpress and Temu, are also considered possible purchasers. They still lag behind domestic rivals such as Coupang, Kurly and Gmarket but obtaining Baedal Minjok could change the landscape.

Whoever takes over Woowa Brothers, the market in Korea is expected to see a major shift where companies will no longer rely on food delivery apps but rather more diversified marketing tools like memberships, ad exposure, grocery delivery and local commerce data.

"The new Woowa Brothers owner will open up the second chapter of the delivery platform market here where competitors no longer vie for food delivery but introducing a larger e-commerce platform covering as much of consumers’ daily lifestyles as possible,” another industry official said.