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South Korea Makes Unit Sale Condition For Delivery Hero's $4 Billion Woowa Deal

Berlin-based Delivery Hero agreed last year to buy Korea's top food delivery app owner Woowa as it expands in Asia's fast-growing but crowded market. For Woowa, the buyout is a lifeline in an intensely competitive market.

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South Korea's antitrust regulator said on Monday Delivery Hero must sell its Yogiyo subsidiary to win approval for a $4 billion takeover of Woowa Brothers that would have given it a near monopoly in the country's food delivery market.

The ruling from the Korea Fair Trade Commission (KFTC) is a setback for consolidation in the world's third-largest online food delivery market, although it was not immediately clear if it will scupper the deal as the market dominance of Woowa's No. 1 app is significant even without the subsidiary.

Berlin-based Delivery Hero agreed last year to buy Korea's top food delivery app owner Woowa as it expands in Asia's fast-growing but crowded market. For Woowa, the buyout is a lifeline in an intensely competitive market.

But the KFTC said it would only approve the takeover if Delivery Hero sold its entire stake in the country's No. 2 food delivery app Yogiyo.

The unit sale would ease concerns that diners would end up paying more under the current deal, while allowing the synergy that Delivery Hero cited as the reason for the acquisition, KFTC chairperson Joh Sung-wook told a briefing.

"Since Delivery Hero said the purpose of this deal is to combine its logistics technology and Woowa's marketing ability, and I think this is sufficiently possible ... I expect they'll accept this conditional approval," she said.

KFTC said the combined market share of the entity resulting from the takeover, if the unit was not sold, would be 97% of food delivery transactions as of July.

Even if Delivery Hero sold Yogiyo, Woowa's No.1 app had about 15.8 million monthly active users as of November, or 82% of all food delivery apps' monthly active users in South Korea, according to mobile big data platform IGAWorks.

A Seoul-based spokeswoman for Delivery Hero declined immediate comment.

South Korea's food delivery market ranks third after China's and the United States', Euromonitor data showed, and is expected to grow 40% this year to about $15.4 billion.

The number of delivery app users exceeded 17.8 million in August, according research provider Nielsen Koreanclick, more than one-third of South Korea's 51.8 million population.

(Reuters)


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