Delivery Hero’s $4 billion takeover of Woowa Brothers, a South Korean startup that operates food delivery app BaedalMinjok, has hit a snag after the country’s antitrust watchdog requested that it divest the subsidiary Yogiyo as a condition of approval.
The Korea Fair Trade Commission (KFTC) finished its preliminary review and recommended earlier this week that Delivery Hero sell Yogiyo to obtain antitrust approval for the deal. Yogiyo app ranks second behind BaedalMinjok in South Korea.
The final decision will be made by the KFTC during its plenary session scheduled for December 9. Delivery Hero reportedly said it would try to sway the regulator with alternative solutions, but observers are skeptical that the decision will be reversed.
Delivery Hero could pull out in the worst case scenario, because the deal is subject to customary closing conditions, including regulatory approvals, industry watchers said.
“It appears this result was unexpected by both Delivery Hero and Woowa Brothers,” an industry insider said. “It is up to Delivery Hero whether or not it will accept the condition requested by the KFTC to close the deal.”
Delivery Hero, which is working with law firm Kim & Chang, has relied on the benefits of the deal, such as Woowa Brother’s expansion into other Asian markets, to persuade the antitrust watchdog to grant approval. Woowa Brothers is working with Yulchon LLC.
The ruling contrasts with the decision to grant eBay antitrust approval for its 2009 takeover of Gmarket, then the largest player in the South Korean online shopping market, even though the U.S. ecommerce giant owned the second-largest player, Auction. The KFTC gave its approval on the condition that fee increases be limited.
Concerns about fairness can be also raised, industry watchers said, as the state-run Korea Development Bank is currently pushing for Korean Air’s acquisition of Asiana Airlines, which would result in the country’s two largest airlines being combined. (Reporting by Hye-ran Kim)