Delivery Hero: to Expand Asian Operations

Berlin / DE. (dhh) Delivery Hero Holding S.E., one of the leading global online food ordering and delivery marketplaces, signed agreements with shareholders, including senior management, of Woowa Brothers Corporation. The Transaction reinforces Delivery Hero’s commitment to expand into fast-growing Asia and solidifies its position as the largest global food delivery platform, outside of China by number of orders.

Woowa operates the largest online food delivery service in South Korea, Baedal Minjok, which generated approximately 100 million orders in Q3 2019. Woowa predominantly operates a marketplace business model called «Baemin Service» which accounts for 97 percent of orders in nine months. In the financial year ending December 31, 2018, Woowa grew revenues in Korea by 96 percent year-on-year to EUR 242 million, with GMV reaching EUR 4.0 billion and achieved an Ebitda of EUR 46 million. In the nine months of 2019, Woowa grew revenues in Korea by 84 percent year-on-year to EUR 301 million, with GMV reaching EUR 4.6 billion and achieved an Ebitda of approximately EUR 3 million. Woowa also operates a business in Vietnam which fulfilled approximately 1.5 million orders in Q3 of 2019.

As part of the transaction, a Joint Venture with the management of Woowa will be established in Singapore. Woowa founder and CEO, Bongjin Kim, will become the Chairman of the Board of Directors and Executive Director of the Joint Venture to manage the operations of the Delivery Hero group in the Asia Pacific region and oversee expansion in the region.

The Transaction is valued at an enterprise value of US USD 4.0 billion (or EUR 3.6 billion) on a cash and debt free basis, before certain adjustments. Delivery Hero is expected to achieve 100 percent ownership in Woowa over time for a consideration of approximately a US USD -equivalent EUR 1.7 billion in cash and EUR 1.9 billion in shares based on a 20-day VWAP of EUR 47.47.2 At closing of the Transaction, Delivery Hero will own up to 88 percent of the share capital in Woowa with the remaining 12 percent to be held by Woowa management and to be exchanged in Delivery Hero shares over a four year time horizon, to achieve the 100 percent ownership.

The new shares to be issued from the existing authorization by Delivery Hero will be up to 40.1m equating to approximately 17.5 percent of Delivery Hero shares outstanding post Transaction. The closing of the Transaction is subject to certain conditions including financing and regulatory approvals and is expected to occur in H2 2020.

Niklas Östberg, CEO of Delivery Hero, commented: «We are excited to enter into a strategic partnership with Woowa Brothers, which is at the forefront of innovative technological services and has put Korea on the map in the global online food delivery industry. We fully support Woowa Brothers to continue making investments and innovate for the benefit of the wider industry participants, including consumers, restaurants, employees and riders. To this end, the joint venture will have the full support of, and access to, Delivery Hero’s global resources.»

Bongjin Kim, CEO and Founder of Woowa, commented: «The Korean food delivery market is still in the very early stages of development, and offers vast opportunities to grow the customer base and expand into adjacent on-demand services. We are excited to partner with Delivery Hero to leverage their platform and global expertise to facilitate expansion in Asia, as well as to further penetrate the high potential Korean market. The partnership will also help achieve economies of scale to effectively compete against global and domestic IT giants. Together we aim to cultivate and invest into development of online food delivery services for the benefit of consumers, restaurants and riders.»

Strategic Rationale

• Woowa is the largest online food delivery platform in South Korea
• Woowa generated 365 million orders over the last twelve months ended September 30, 2019, up 61 percent year-over-year.
• Woowa’s platform includes approximately 111 thousand ad-paying restaurants as of September 30, 2019.
• Opportunity to unlock a large and underpenetrated market
• The Korean online food delivery market is still nascent, with the majority of consumers still ordering over the phone, which provides an opportunity to penetrate a total addressable market of EUR 83 billion in Foodservices and EUR 192 billion in Groceries over the next decade.
• Ability to leverage Delivery Hero’s technology platform, global expertise and best practices to improve Woowa’s service offering for the benefit of customers, restaurants, employees and riders
• Delivery Hero offers a strong track record of global best practice sharing and expertise that can be applied in Korea to benefit all stakeholders.
• Further roll out of «own delivery», including leveraging Delivery Hero logistics platform to improve the customer experience and decrease delivery times.
• Support the move into adjacent on-demand services and vertical integration such as «dark stores» to provide consumers with greater choice.
• Further restaurant technology including the expansion of cloud kitchens.
• Further expanding leadership in Asia
• The Joint Venture creates a platform to tackle attractive investment opportunities in the Asia-Pacific region and to further expand Delivery Hero and Woowa’s Asian footprint.
• The Transaction underpins Delivery Hero’s position as an attractive investment opportunity
• The Transaction increases Delivery Hero’s exposure to one of its key growth regions – Asia and reinforces its position as the largest global food delivery platform, outside of China by number of orders.

Transaction Highlights

• The Transaction is valued at an enterprise value of US USD 4 billion (or EUR 3.6 billion) on a cash and debt free basis, before customary adjustments.
• Delivery Hero is expected to achieve 100 percent ownership in Woowa over time for a consideration of approximately USD-equivalent of EUR 1.7 billion in cash and approximately EUR 1.9 billion in shares based on a 20-day VWAP of EUR 47.47.
• Delivery Hero has contractually agreed to acquire an economic stake of approximately 82 percent in Woowa, with the remaining approximately 6 percent of Woowa shareholders being approached post announcement. Woowa’s management will continue to own approximately 12 percent with agreed liquidity events over the course of the subsequent four years at agreed terms to be settled in Delivery Hero shares.
• In total, Delivery Hero will issue up to 40.1 million shares, equating to approximately 17.5 percent of Delivery Hero shares outstanding post Transaction based on a 20-day VWAP of EUR 47.47. Approximately 31.2 million shares will be delivered at closing and additional approximately 8.9 million shares will be delivered over a four year time horizon.
• The share component is subject to certain adjustments including customary dilution protections and certain downside protection. A certain portion of the share component of the consideration that the financial shareholders will receive at closing has a guaranteed minimum share price protection, and a small portion of the share component that the management shareholders will receive over the course of two to four years after closing is subject to a full guaranteed share price protection and would be settled in cash.
• The cash consideration will be financed via a combination of equity, equity-linked instruments and debt at closing.
• The Joint Venture will make investments in Korea to expand product offering and develop new technologies. Baedal Minjok and Delivery Hero’s local brands will continue to operate separately and independently in Korea following the transaction closing.
• Delivery Hero commits to support innovation in Korea and the rest of Asia through a US USD 50 million technology fund to develop and cultivate innovative online food delivery services for the benefit of consumers, restaurants, employees and riders
• Delivery Hero continues to adhere to its global strategy of empowering highly experienced, entrepreneurial, founder-led management teams. Following the completion of the transaction, Bongjin Kim, CEO and Founder of Woowa, will serve as the Chairman of the Board of Directors and an Executive Director of the Joint Venture, and will become a member of the Global Advisory Board of Delivery Hero, to contribute to its leadership on a global scale.

Conditions, Transaction Timeline and Advisors:

• Closing of the Transaction is subject to certain conditions including regulatory approval and financing of the transaction.
• Delivery Hero will hedge its US USD -exposure through a customary hedging instrument.
• Based on the currently available information, Delivery Hero expects the Transaction to close in H2 2020.
• In connection with this Transaction, Morgan Stanley is acting as exclusive financial advisor to Delivery Hero, and Bae, Kim + Lee LLC, Kim + Chang, Sullivan + Cromwell LLP and WongPartnership LLP are acting as legal advisors.