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Delivery Hero sells Yogiyo to GS Retail, Affinity-led group

The 800 billion won deal is likely to expedite GS Retail's transition into an e-commerce platform

By Aug 15, 2021 (Gmt+09:00)

3 Min read

(Courtesy of Yogiyo)
(Courtesy of Yogiyo)

Germany’s Delivery Hero SE has signed an agreement to sell South Korea’s second-largest food delivery platform Yogiyo to a consortium of GS Retail Co., Affinity Equity Partners and British investment firm Permira for 800 billion won ($684 million).

The deal, announced by GS Retail on Aug. 13, will clear the way for the German food delivery giant to complete its $4.3 billion acquisition of South Korea's dominant food delivery app Baedal Minjok, or Baemin. The disposal of Delivery Hero's 100% stake in Yogiyo was a condition for the Baemin sale, put forward by the Korea Fair Trade Commission for the cross-border transaction signed in late 2019.

On top of the 800 billion won acquisition price, the three-way consortium will inject an additional 200 billion won to buy new shares to be issued by Yogiyo. 

As the strategic buyer, GS Retail will invest a total of 300 billion won to take a 30% stake in the delivery platform. The acquisition is expected to jump start its efforts to expand its offline-focused business into online-based services. Across South Korea, it runs about 16,000 outlets of the convenience store brand GS25 and the supermarket chain GS The Fresh.

Yogiyo controls about 18% of the country's food delivery market, trailing Baemi, which controls about two-thirds of the market. Coupang Eats, part of the US-listed e-commerce player Coupang Corp., has been rapidly narrowing its gap with second-ranked Yogiyo.

The deal follows GS Retail's purchase in April this year of a 19.53% stake in Mesh Korea, an operator of quick delivery service provider Vroong, to become its second-largest shareholder. Vroong operates about 400 small distribution centers in major cities in South Korea.

Delivery Hero sells Yogiyo to GS Retail, Affinity-led group

Affinity Equity and Permira were among the five shortlisted bidders for Yogiyo, which included Shinsegae Inc.'s e-commerce brand SSG.COM, Bain Capital and MBK Partners.

The purchase price is almost half of Delivery Hero’s initial asking price of 2 trillion won, after SSG.COM and MBK dropped out of the race.

Forming a consortium, both Affinity Equity and Permira brought in GS Retail as a strategic investor. The three-way group had been in exclusive talks with Delivery Hero. 

QUICK COMMERCE

The unit of South Korea's energy- to retail-focused GS Group is aiming to grab a bigger share of the quick commerce market, or fast delivery service of small quantities of goods, which it estimates to grow to 5 trillion won by 2025 in the country.

Making use of its 16,000 grocery shops and 60 distribution centers as its micro-fulfillment centers, GS Retail aims to set itself apart from other e-commerce players by offering quick shipping of fresh food items such as meat and fish, in a market focused on nonfood items and processed food.  

Micro-fulfillment centers bring the products closer to their customers to cut down on last-mile delivery times. 

"We'll connect our 16,000 offline platforms with online customers, which will give us an opportunity to make a quantum leap," said GS Retail Executive Park Sollip. "By doing so, we'll aggressively expand into other new businesses as well."

Yogiyo has been using Delivery Hero's big data and algorithms for fees from the allocation of delivery people to restaurants' mobile platforms. Thus, its new owner may have to build its IT infrastructure, which some industry observers had said may cost as much as starting a new business

GS Retail has said it will invest about 1 trillion won to expand its infrastructure for online commerce over the next five years.

Write to Han-shin Park and Yoo-chung Roh at phs@hankyung.com
Yeonhee Kim edited this article.
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