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Delivery Hero eyes Asia expansion with €3.6B deal to buy Woowa Brothers

Online food ordering and delivery service Delivery Hero SE on Dec. 13 signed an agreement to buy South Korea's Woowa Brothers Corp. for €3.6 billion as the German company seeks to expand in the fast-growing Asian market.

In late-morning trading in Germany, Delivery Hero's shares traded up €10.38, or 20.7%, at €60.54.

Under the terms of the deal, Delivery Hero is expected to pay a U.S.-dollar equivalent of €1.7 billion in cash and €1.9 billion in shares for 100% ownership of Woowa.

At the close of the transaction, which is expected in the second half of 2020, subject to financing and regulatory approvals, Delivery Hero will own up to 88% of the share capital of Woowa with the remaining 12% to be held by Woowa management and exchanged over a four-year period.

The stock component, comprising up to 40.1 million shares, represents 17.5% of the shares outstanding in Delivery Hero.

A Reuters report, citing a statement issued by Woowa, said Delivery Hero would buy out existing shareholders including Goldman Sachs, Hillhouse Capital, Sequoia Capital and Singapore fund GIC.

In a statement, Delivery Hero said the deal would allow it to leverage its technology platform, global expertise and best practices to improve Woowa's service offering. It also would extend its own delivery and utilize its logistics platform to improve customer experience and reduce delivery times. Delivery Hero raised the prospect of moving into "adjacent on-demand services and vertical integration" to offer consumers greater choice.

Delivery Hero operates in 41 countries in Europe, the Middle East and North Africa, Latin America, and the Asia-Pacific region. The Berlin-based company, which employs more than 22,000 people, also operates its own delivery service in over 400 cities.

Woowa operates the largest online food-delivery service in South Korea, called Baedal Minjok, which generated about 100 million orders in the third quarter of 2019. In the year ended Dec. 31, 2018, Woowa posted EBITDA of €46 million on revenue of €242 million. In the first nine months of 2019, Woowa reported revenue jumped 84% year over year to €301 million.

Delivery Hero would "support Woowa Brothers to continue making investments and innovate for the benefit of the wider industry participants, including consumers, restaurants, employees and riders," CEO Niklas Östberg said.

As part of the deal, Delivery Hero will set up a joint venture with the management of Woowa in Singapore to run the operations. Bongjin Kim, CEO and founder of Woowa, will serve as chairman of the board and executive director of the venture to manage the business of Delivery Hero in Asia-Pacific and to oversee expansion in the region.

Morgan Stanley is acting as financial adviser to Delivery Hero, while Bae Kim & Lee LLC, Kim & Chang, Sullivan & Cromwell LLP and WongPartnership LLP are acting as legal advisers.