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Delivery Hero could face up to $1.4 bn in fines if it fails to sell Yogiyo

Jan 18, 2021 (Gmt+09:00)

Logos of Baemin (at left) and Yogiyo (at right). To buy Baemin, Delivery Hero was told to sell Yogiyo.
Logos of Baemin (at left) and Yogiyo (at right). To buy Baemin, Delivery Hero was told to sell Yogiyo.

Food delivery giant Delivery Hero SE is facing some time pressure to sell South Korea’s No. 2 food delivery app Yogiyo, estimated at 2 trillion won ($1.8 billion), by early next year. Otherwise, it could face up to 1.5 billion won ($1.4 million) in fines, or up to two years in jail.

The German delivery service provider was told last year by the Korea Fair Trade Commission (FTC) to divest of Yogiyo, one of its main Korean operations, as a condition of closing its purchase of the country’s top food delivery service Baedal Minjok (Baemin), for $4.3 billion. 

Delivery Hero accepted the requirement and has begun the process of hiring a sale manager for Yogiyo, which must be sold within six months after receiving the FTC's written approval for its Baemin acquisition. The deadline can be extended by another half year.

FTC will send its conditional approval in written form to Delivery Hero this month.

The deadline might be seen as too tight, in the absence of strong candidates for the loss-making delivery service provider. Its market share of 32.2% is almost half that of Baemin’s.

Given the size of the upcoming deal, only retail giants such as Lotte, Shinsegae, Hyundai Department Store and CJ have been speculated as potential buyers, alongside global private equity firms.

If Delivery Hero fails to sell Yogiyo within the deadline, it would likely be charged 1/10,000th of the transaction value of 4.75 trillion won ($4.3 billion) for Baemin on a daily basis, according to industry sources on Jan. 18. The penalty will be equivalent to 500 million won ($452,000) per day.

In the worst-case scenario, Delivery Hero could be indicted by the FTC for failing to comply with the requirement. Then it could face up to a two-year jail term, or 1.5 trillion won in fines.

In December 2019, Delivery Hero announced its agreement to buy an 87% stake in the operator of Baemin, Woowa Brothers Corp.

It will buy the stake from financial investors, including Hillhouse Capital Group, Altos Ventures, Goldman Sachs PIA and Naver Corp., a top Korean internet portal, in the current quarter. Those financial investors will receive a combined 1.7 billion euros ($2 billion) in cash and 31.2 million new shares in Delivery Hero worth 4.18 billion euros, based on its current share price, according to investment banking sources last week.

By Chae-Yeon Kim 

Yeonhee Kim edited this article.

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