Delivery Hero wins approval for Woowa deal in Korea

The deal was announced 12 months ago but was held up by antimonopoly concerns. Germany-headquartered Delivery Hero – which operates in over 700 cities in about 50 countries – will have to divest its existing Korean operation, Yogiyo, to proceed with the Woowa purchase. This should happen within six months, the Korea Fair Trade Commission (KFTC) said, though a six-month extension could be granted under certain circumstances, according to a statement.

Sung-wook Joh, head of the KFTC, said the divestment would ease concerns about price hikes, Reuters reported. Woowa and Yogiyo were responsible for 97% of all food delivery transactions in Korea as of July. Woowa alone had 15.8 million monthly active users (MAUs) – or 82% of MAUs across all food delivery apps – as of November, according to IGAWorks.

Delivery Hero agreed to 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. Investors 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 and a $320 million investment by Hillhouse, GIC and Sequoia in 2018. Other backers include BonAngels Venture Partners, IMM Investment, Stonebridge Capital, Altos Ventures Korea, and CyberAgent Ventures.

Woowa was founded in 2010 by Bong-jin Kim and operates the Baedal Minjok platform. When the acquisition was announced, 97% of revenue came from the Baemin Service marketplace business, which connects diners with restaurants and receives fees for advertising and commissions on orders. It also handles deliveries for restaurants through Baemin Riders, while two newer businesses focused on grocery deliveries and supplying merchandise and processed foods to restaurants.

As of September 2019, Woowa was processing 35 million monthly orders in Korea and 600,000 in Vietnam, and it had 111,000 ad-paying restaurants. In 2018, gross merchandise value (GMV) out of Korea came to EUR4 billion, while revenue was EUR242 million and EBITDA was EUR46 million. For the first nine months of 2019, those figures were EUR4.6 billion, EUR301 million, and EUR3 million, respectively.

In the third quarter of 2019, Woowa generated EUR1.7 billion in GMV. This compared to EUR654 million for Delivery Hero’s Asian operation, which comprises Yogiyo as well as Foodpanda in Hong Kong, Taiwan, Pakistan, Bangladesh, and certain Southeast Asia markets.

Final approval of the deal is expected in the first quarter of 2021. The Baedal Minjok and Delivery Hero brands will fall under a single Singapore-based joint venture but continue to operate independently once the transaction closes. Kim will become chairman and executive director of the combined Asia Pacific operation, with Foodpanda’s Asia CEO and Woowa’s CFO serving as co-CEOs.

“There is tremendous potential in the Korean food delivery market and we are very excited to partner up with Delivery Hero to benefit from their knowledge around logistics, technology, and scaling businesses. Our partnership will move the whole ecosystem forward, and we will work together to innovate the delivery industry in Asia,” said Kim.

Delivery Hero’s Asia Pacific operation has grown substantially over the past 12 months, without considering the impact of the Woowa acquisition. GMV more than doubled year-on-year to EUR1.4 billion, revenue rose 162% to EUR331 million, and orders grew 178% to 189 million. Asia accounts for approximately 42% of the global business by GMV and revenue, and 52% by orders.

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