The Fair Trade Commission decided to sell its subsidiary Yogiyo in order to acquire the nation’s No. 1 delivery application (app)’Baedal People (Baemin)’ to Delivery Hero (DH) in Germany. DH, which had been opposed to the FTC’s position, said it would accept the decision. As Yogi Yoga, the second largest delivery app in Korea, comes out for sale, the domestic delivery app market is expected to change.
On the 29th, the Fair Trade Commission announced that it has confirmed the results of the merger review that DH will approve the acquisition of Baemin under the condition of selling 100% of Yogiyo’s stake. It also issued an order to maintain the current status until the sale of the stake is completed, in order to prevent a decline in competitiveness such as Yogiyo service quality. Although it was supposed to be sold within 6 months, it plans to allow an extension of the period if unavoidable circumstances are recognized. In December of last year, DH signed a contract to acquire 88% of Baemin’s elegant brothers for $4 billion (approximately 4.4 trillion won).
The FTC decided that if DH had both Baemin and Yogiyo, the delivery app market would become a de facto monopoly. According to the Fair Trade Commission, the share of the transaction amount between DH and Baemin in the delivery app market reached 99.2% in 2019 and 96.6% in July this year. DH recently insisted that competition will remain as’Coupangitz’ is growing rapidly, but it was not accepted. “The fact that Baemin actually tried to raise the fee while reorganizing the fee system in April was a reference for the review,” said Sungwook Cho, chairman of the Fair Trade Commission.
DH said acceptance. DH said, “We respect the decision of the FTC. “It is very regrettable that we have to make a difficult decision to sell Delivery Hero Korea (Yogiyo) for M&A.” DH rebelled against the FTC’s conditional sale recommendation last month, saying, “I disagree,” but it seems that it is profitable to sell Yogiyo as it can obtain Baemin, the number one in the Korean market. An official in the IT industry said, “DH has made a bold decision because it is highly likely to lead to a winner takeover of the top-ranked operator due to the nature of the platform market.”
As Yogi Yoga with 18% market share comes out for sale, it is expected that the distribution industry, the platform, and the investment industry will unfold. The market estimates that Yogiyo’s ransom is around 2 trillion won. First of all, the latecomers of the industry, such as Coupang Itz and Wemepo, are mentioned as candidates. However, there are observations that DH is unlikely to sell Yogiyo to competitors who will threaten Baemin. Large IT platform operators such as Naver, which operates a simple order service, and Kakao, which order food through Kakao Talk, are also selected as candidates. The companies are in the position that they are not considering the acquisition at this time. There are also observations that it will be difficult to find buyers easily. An official from the investment banking (IB) industry said, “Conflicts with self-employed companies over fees are unlikely to arise. Even for private equity funds, it will be difficult to come out because only Bae Min is paradoxically the one to try to exit.”
Regarding the FTC’s decision to’conditionally approve’, the startup industry was concerned that it would make M&A difficult, lowering the value of startups and reducing investment. The Korea Startup Forum, a startup organization, criticized that “the platform operators have turned away from the fact that they can enter the food delivery market as much as possible based on the network effect.”
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