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| Delivery Hero Co-founder and CEO Niklas Ostberg, left, and Woowa Brothers CEO Kim Bong-jin. |
By Nam Hyun-woo
Delivery Hero's (DH) takeover of Baedal Minjok, Korea's largest food delivery app, will likely face an antitrust hurdle because the German firm controls the country's top three food delivery service providers, according to industry officials Sunday.
They said the Fair Trade Commission would decide the fate of the $4 billion deal as it was subject to the antitrust agency's monopoly review. But they are unsure about whether the takeover will receive the green light or not, given previous outcomes of M&A cases between market-leading companies.
According to Woowa Brothers, operator of Baedal Minjok, it will apply for an FTC review of DH's purchase of the whole stake in Woowa Brothers.
On Friday, Woowa Brothers and DH announced that the latter would buy the 87 percent stake in the former from investors such as Goldman Sachs, Hillhouse Capital, Altos Ventures and Sequoia Capital. It will later acquire the remaining 13 percent owned by Woowa board members. DH valued the deal at $4 billion.
If granted, DH, which is already running Yogiyo and Baedaltong food delivery services in Korea, will become a dominant player in the country's food delivery market. According to Nielsen Korea, Baedal Minjok's market share reached 55.7 percent last year, followed by Yogiyo with 33.5 percent and Baedaltong with 10.8 percent.
The transaction is expected to become a subject of FTC review as is required by law. The Monopoly Regulation and Fair Trade Act requires the FTC to approve M&A deals when one party has more than 300 billion won in assets or sales and the other has more than 30 billion won in assets or sales.
Woowa Brothers posted 319.2 billion won in sales last year. DH Korea does not reveal its earnings, but is believed to log more than 30 billion won in sales.
"By market share, the transaction will make DH a monopolistic player in Korea's food delivery service market," an industry official said on condition of anonymity. "However, it is hard to predict what will happen, because the FTC will take into account the possibility of rises in delivery fees, [and] the impact on fair competition after the deal."
In 2016, the FTC rejected SK Telecom's bid to acquire CJ Hello, a leading cable television operator, on concerns of a monopoly and oligopoly in the subscription TV market. In February, LG Uplus acquired CJ Hello's controlling stake and the FTC granted conditional approval, saying the deal had only a slim chance of harming fair competition.
But other industry officials said the DH deal depends on how the FTC defines the market, citing the case of e-commerce firms Gmarket and Auction, run by eBay Korea.
In 2011, the FTC approved the consolidation of Gmarket and Auction by eBay Korea, saying the market would be "likely to turn more competitive" by introducing new players. The country's largest internet portal, Naver, then announced its entry into the e-commerce business.
An FTC official said it had yet to receive an application from Woowa Brothers or DH, and would run an in-depth review after receiving it.
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