SEOUL • Germany's Delivery Hero has agreed to buy South Korea's top food delivery app operator, Woowa Brothers, for US$4 billion (S$5.4 billion) and form a joint venture to take on heavyweights like Uber Eats in other fast-growing Asia markets.
Founder and chief executive of Woowa Brothers Kim Bong-jin, 43, will head the newly formed joint venture with Delivery Hero, based in Singapore.
Established in 2010 as a food delivery firm, Woowa Brothers - "woowa" means elegant in Korean - grew fast to become the country's top online food delivery services firm, taking over 30 million orders per month. It has also expanded into the business of providing shared kitchen spaces for restaurateurs and moved into Vietnam.
The deal is the biggest global play so far for a food delivery app. Woowa said the sale was "a survival strategy" in an intensely competitive market and also the biggest deal involving a South Korean Internet firm.
South Korea, with a high smartphone penetration rate, is the world's No. 4 market for online food orders.
Delivery Hero's Yogiyo app ranks second behind Woowa's Baedal Minjok, but the sector leader faces stiff competition from rivals such as e-commerce firm Coupang, backed by Japan's deep-pocketed SoftBank Group. Uber Technologies' Uber Eats delivery business pulled out of South Korea earlier this year, reflecting the intensity of competition.
South Korea's online market for food delivery and pickup has more than doubled over the past five years to US$5.9 billion - bigger than Japan and Germany's markets combined, and trailing only China, the United States and Britain, Euromonitor data showed. Euromonitor expects the South Korean market to jump to US$9 billion by 2023.
Under the terms of the deal, Delivery Hero will acquire an 87 per cent stake held by Woowa investors, such as Goldman Sachs, Singapore wealth fund GIC, Hillhouse Capital and Sequoia Capital. Delivery Hero will acquire the remaining 13 per cent owned by Woowa management in the future, said a spokesman.
The growing global food delivery trade has triggered a wave of deal-making and rising valuations. The purchase of Britain-based Just Eat is set to top the Delivery Hero-Woowa deal: Dutch firm Takeaway.com is in talks to buy Just Eat in a transaction that values the latter at £4.3 billion (S$7.8 billion).
For Delivery Hero, now worth nearly €10 billion (S$15 billion) by market value, buying Woowa expands its presence in the fast-growing Asian market, even as Europe becomes more competitive.
It sold its German food delivery businesses to Takeaway.com last year in exchange for cash and an equity stake in the buyer.
REUTERS
