Delivery Hero to buy Korea's Woowa Brothers for $4b

Germany-headquartered Delivery Hero – which operates in 400 cities across 34 cities in Europe, the Middle East and North Africa, Latin America, and Asia Pacific – will take an initial 88% stake in Woowa, paying EUR1.7 billion ($1.9 billion) in cash and EUR1.48 billion in shares. The company will assume 100% ownership over a four-year period by exchanging a 12% stake held by Woowa management for 8.9 million shares – worth EUR422.5 million – in Delivery Hero shares, a statement said.

Delivery Hero has contractually agreed to acquire 82% of Woowa with shareholders representing 6% approached post-announcement. Those exiting – or taking liquid Delivery Hero stock – include Goldman Sachs, GIC Private, Hillhouse Capital, and Sequoia Capital.

AVCJ Research's records show that a Goldman-led consortium invested KRW40 billion ($36 million) in Woowa in 2014. This was followed by a KRW57 billion round led by Hillhouse in 2016. Late last year, Hillhouse was joined by GIC and Sequoia in a $320 million investment.

There have been several other smaller rounds, before and after these relatively large deals. BonAngels Venture Partners provided the Series A in 2011 and then IMM Investment, Stonebridge Capital and Altos Ventures Korea committed KRW2 billion the following year. CyberAgent Ventures joined the Series B investors in a third round of funding worth around $11 million in 2014.

Woowa was founded in 2010 by Bong-jin Kim and operates the Baedal Minjok platform. The name translates into English as “delivery nation.” It has become the largest online food delivery service in Korea, generating 100 million orders and EUR1.75 billion in GMV (gross merchandise value) for the third quarter of 2019. This compares to a GMV of EUR654 million for Delivery Hero’s Asia operation, which accounts for about one-third of the global business, according to a filing. There are also 111,000 ad-paying restaurants on the Baedal Minjok platform.

For the 12 months ended December 2018, revenue came to EUR242 million – up 96% year-on-year – while GMV and EBITDA reached EUR4 billion and EUR46 million, respectively. For the first nine months of 2019, revenue, GMV, and EBITDA were EUR301 million, EUR4.6 billion, and EUR3 million. Over the same period, Woowa’s Vietnam business handled 1.5 million orders.

The Baedal Minjok and Delivery Hero brands will continue to operate independently once the transaction closes. However, Kim will be appointed chairman and executive director of Delivery Hero’s Singapore-based Asia Pacific operation, overseeing expansion across the region. A $50 million technology fund will be established to invest in innovative online food delivery services.

The acquisition is expected to consolidate Delivery Hero’s position as the largest food delivery platform globally, outside of China, by number of orders. The transaction is also a means of solidifying its position in the highly competitive yet underpenetrated Korean market, where most consumers still order over the phone. Delivery Hero estimates that the total addressable market for food services will be EUR83 million over the next decade, with groceries reaching EUR192 billion.

At present, 97% of Woowa’s revenue comes from its Baemin Service marketplace business, which connects diners with restaurants and receives fees for advertising and commissions on orders. Baemin Riders handles the delivery as well, while two newer businesses focus on grocery deliveries and supplying merchandise and processed foods to restaurants.

Delivery Hero’s Yogiyo app is said to rank second behind Baedal Minjok in Korea. With UberEats exited the market last year, the major competitive threat comes from Coupang, a local private equity-backed e-commerce start-up that has been investing heavily in food delivery.

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• Topics
• North Asia
• Technology
• Trade sale
• South Korea
• TMT
• Hillhouse Capital Management
• Sequoia Capital
• GIC Private
• Goldman Sachs
• Altos Ventures
• IMM Investment