Delivery Hero Nears Agreement to Buy Woowa in $4 Billion Deal
An employee rides a bicycle while carrying a backpack food delivery box outside the headquarters of Foodora, the food courier service operated by Delivery Hero Holding GmbH, in Berlin, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

Delivery Hero Nears Agreement to Buy Woowa in $4 Billion Deal

(Bloomberg) -- Delivery Hero SE will take control of South Korea’s biggest food delivery app, Woowa Brothers Corp., at a $4 billion valuation in a major push into Asia. The German company’s shares jumped by a record.

Delivery Hero will buy an 87% stake in Woowa from the existing investors and the remaining 13% held by Woowa’s senior management, including its founder Kim Bong-jin, will be converted into Delivery Hero shares, it said in a statement Friday, confirming an earlier Bloomberg News report. Delivery Hero will pay as much as 1.7 billion euros ($1.9 billion) in cash and up to 1.9 billion euros in stock.

The deal makes yet another leg in the wave of consolidation sweeping the food delivery sector. Asia will become Delivery Hero’s biggest and fastest growing market, Chief Executive Officer Niklas Oestberg said in an interview. Woowa’s Kim will now be Delivery Hero’s biggest shareholder on the management team, and he’ll hold a role on the company’s global advisory board. The firms will also establish a joint venture in Singapore.

“The main aim of this partnership is to leverage and support growth and expansion in Asia,” Oestberg said. “We see this transaction as an exchange of knowledge.”

Delivery Hero’s shares jumped 23% in Frankfurt trading Friday, a record one-day gain, to close at the highest level since the company’s 2017 initial public offering.

The investment will help South Korea’s Woowa, which operates under the “Baedal Minjok” brand, go up against SoftBank Group Corp.-funded competitor Coupang, which has been investing aggressively in food delivery. Woowa took the opportunity to take a shot at its rivals in its statement on Friday.

“The establishment of the joint venture arises against the backdrop of the changing market environment,” Woowa said. “Although ‘Baedal Minjok’ is the No. 1 domestic delivery app operator, Woowa Brothers faces strong challenges from continuous market entries of IT platforms, including company ‘C’ backed by Japanese capital.”

Delivery Hero has been expanding outside of the hyper competitive European food delivery market. Last year, sales from the Middle East and North Africa overtook Europe, accounting for nearly 40% of revenue. Delivery Hero sold its German operations to Takeaway.com NV last year. Takeaway is currently in a bidding war with Naspers Ltd. spinoff Prosus NV for British app Just Eat Plc.

The deal is among the biggest inbound investments into South Korea’s technology sector, according to data compiled by Bloomberg. Delivery Hero will keep operating the brands it has currently operating in the country, including Yogiyo and Foodfly.

Woowa Brothers, founded in 2010, had 36 million food-delivery orders in South Korea last month, according to the company. It counts Hillhouse Capital and Goldman Sachs Group Inc. as its early investors and among the biggest shareholders besides the management team. Singapore sovereign wealth fund GIC Pte and Sequoia Capital invested at a later stage.

Delivery Hero, headquartered in Berlin, offers food delivery services in more than 400 cities globally with about 22,000 employees, according to its website.

As part of the deal, Woowa’s founder Kim will be in charge of managing the Asian business including South Korea, Vietnam and Hong Kong. Asia accounted for about 38% of its total orders and around 32% of its total revenue in the third quarter, according to its latest financial report.

©2019 Bloomberg L.P.

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