Delivery Hero leaps on $4 bn food app deal to buy Woowa

SEOUL/FRANKFURT: Germany’s Delivery Hero agreed a $4 billion deal to buy South Korea’s top food delivery app owner Woowa Brothers, ratcheting up consolidation in the industry as it expands in Asia’s fast-growing but crowded market. The deal, announced on Friday by Woowa, follows a wave of others in the rapidly expanding sector but is the biggest so far. Woowa said it fell into the arms of its rival as “a survival strategy” in an intensely competitive market. For Delivery Hero, now worth over 11 billion euros ($12 billion) after listing at a value of 4.4 billion euros two and a half years ago, buying Woowa expands its presence in Asia as Europe becomes more competitive. Its shares leapt 18.9 per cent to a record 59.64 euros apiece. Analysts at Barclays said that given the gross merchandise value it acquired, Delivery Hero had agreed “a good price for an asset that gives DH clear leadership in a very attractive market”. Profitability in Korea should also ease concerns by some investors over the company’s cash burn rate, they said. South Korea, with a dense population and high smartphone use, is the world’s fourth biggest market for online food orders. A huge jump in the number of single people living on their own has propelled the boom in food delivery services. Delivery Hero’s Yogiyo app ranks second behind Woowa’s Baedal Minjok in South Korea, but the sector leader faces stiff competition from rivals such as e-commerce firm Coupang, backed by Japan’s deep-pocketed SoftBank Group. “The (food) delivery market has been flooded with gigantic Japan-backed capital and influential online platforms, leading Woowa to factor in partnership as a survival strategy,” said a spokesman at Woowa Brothers. Uber Technologies Inc’s UberEats restaurant delivery business pulled out of South Korea earlier this year. Delivery Hero CEO Niklas Oestberg said in an analyst call he expects no major antitrust hurdles to the deal, citing keen competition by players including Coupang. South Korea’s online market for food delivery and pickup has more than doubled over the past five years to $5.9 billion - bigger than Japan and Germany’s markets combined, and trailing only China, the United States and the United Kingdom, Euromonitor data showed. Euromonitor expects the South Korean market to jump to $9 billion by 2023. Delivery Hero’s Oestberg said he would commit new resources to Woowa to enable it to hold its own and expand. “We fully support Woowa Brothers to continue making investments and innovate for the benefit of the wider industry participants, including consumers, restaurants, employees and riders,” Oestberg said in a statement. The initial transaction is expected to close in the second half of next year, giving Delivery Hero an 88 per cent stake in Woowa with the remaining 12 per cent held by Woowa management, which will be swapped for Delivery Hero shares over the next four years. — Reuters