SEOUL, Dec. 28 (Korea Bizwire) — South Korea’s antitrust regulator on Monday gave a conditional approval to a US$4 billion deal for Germany’s Delivery Hero (DH) to buy the country’s top food delivery app operator, Woowa Brothers.
The Korea Fair Trade Commission (KFTC) said it granted the permission for the takeover on condition that DH sells its food delivery affiliate here, Yogiyo.
DH, which has No. 2 food delivery app brand Yogiyo under its wing, announced in December 2019 that it will acquire an 88 percent stake in Woowa, the operator of delivery app Baedal Minjok, or Baemin.
“We’ve decided to attach the condition on the judgment that there is a high concern that the proposed takeover could limit competition as it would have a far-reaching impact on various stakeholders of multifaceted markets linked to delivery app platforms, such as restaurants, consumers and delivery workers,” the regulator said in a statement.
The KFTC ordered DH to unload a 100 percent stake in its South Korean affiliate Delivery Hero Korea, operator of Yogiyo, within six months. Until the sale is complete, DH should maintain Yogiyo’s asset value and service quality at the current level.
Delivery Hero said it expects to receive the final written approval and the deal to be closed in the first quarter of 2021.
“As part of the transaction, a joint venture will be established in Singapore to manage the foodpanda operations of the Delivery Hero Group and Woowa entities in Asia,” Delivery Hero said in a statement.
Delivery Hero is expected to put its Korean subsidiary Yogiyo up for sale to complete the takeover, which could change the landscape of the nation’s food delivery market.
“We are deeply saddened by the required condition to divest Delivery Hero’s subsidiary Delivery Hero Korea in South Korea,” Niklas Ostberg, CEO and co-founder of Delivery Hero, said in the statement.
The approval came almost one year after DH requested the KFTC to review the deal in what could herald a shake-up in the fast-growing delivery app market.
Founded in 2010, Woowa Brothers has quickly become the country’s top online food delivery services firm, accounting for some 60 percent of the market.
The number of average monthly users of Baemin topped 13 million in September, followed by Yogiyo with 6.6 million, in a country with some 50 million population, according to market researcher Nielsen Koreanclick.
Critics said if the deal is approved, the combined market share of Baemin and Yogiyo will account for some 99 percent, spawning concerns that the merger could lead to a market monopoly and hurt competition.
The KFTC took in to account such concerns, saying that the market dominance from the merger between Baemin and Yogiyo could hamper competition.
The food delivery app market, valued at 10 trillion won ($9.1 billion) last year here, sharply grew this year amid the new coronavirus outbreak, as more people refrained from dining out of concerns about infection risks.
The regulator also said if Baemin and Yogiyo do not compete, it could reduce consumers’ benefits and raise commission fees for eateries.
If the two biggest local delivery service providers are merged, consumers may not be able to use food delivery services at a cheaper price as there would be no competition for discount programs.
The regulator said the conditional approval will allow Baemin and Yogiyo to keep competing in order to promote consumers’ benefits.
“We also permitted the DH’s acquisition of Woowa Brothers so that the two firms create synergy through cooperation by combining DH’s technology and Woowa’s marketing ability,” the watchdog said.