The Delivery Hero headquarters in Berlin, Germany. Photo: Reuters

SEOUL: Germany’s Delivery Hero has agreed to buy South Korea’s top food delivery app operator Woowa Brothers for $4 billion and form a joint venture to take on heavyweights like Uber Eats in other fast-growing Asia markets.

The deal, announced yesterday by Woowa, is the biggest global play so far for a food delivery app, one of the hottest tech sectors around. 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 dense population and a high smartphone penetration rate, is the world’s No. 4 market for online food orders. A huge jump in the number of single people living on their own is also propelling the boom in food delivery services.

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 Inc’s UberEats restaurant delivery business pulled out of South Korea earlier this year, reflecting the intensity of competition.

“The (food) delivery market has been flooded with gigantic Japan-backed capital and influential online platforms, leading Woowa to factor in partnership as a survival strategy,” said a spokesman at Woowa Brothers.

The Delivery Hero headquarters in Berlin, Germany. Photo: Reuters

South Korea’s online market for food delivery and pickup has more than doubled over the past five years to $5.9 billion — bigger than Japan and Germany’s markets combined, and trailing only China, the United States and the United Kingdom, Euromonitor data also showed. Euromonitor expects the South Korean market to jump to $9 billion by 2023.

It wasn’t immediately clear whether the deal between the two leading players in the market would face antitrust hurdles.

Under terms of the deal, Delivery Hero will acquire an 87 percent stake held by Woowa investors such as Goldman Sachs, Singapore fund GIC, Hillhouse Capital and Sequoia Capital. Delivery Hero will acquire the remaining 13 percent owned by Woowa’s management in the future, said a Woowa spokesperson, without elaborating on a timeline.

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, and expanded into the business of provided shared kitchen space for restaurateurs as well as moving into Vietnam.

Founder and chief executive officer Kim Bong-jin, 43, will head up the newly formed joint venture with Delivery Hero, based in Singapore, to tap into the booming food delivery market in Asia. Regional players like Singapore-based Grab and Indonesia’s Gojek are already well implanted. ― Reuters