European food-delivery giant Delivery Hero SE has agreed to buy South Korean rival Woowa Brothers for $4 billion, heating up the global battle to meet growing consumer demand for delivered meals.
Online food-delivery businesses around the world are joining forces as more consumers opt to have their meals brought to their homes or offices, with Amazon.com Inc. and Uber Technologies Inc. joining the fray in recent years.
Asia in particular is seen as a hot market, where a rising middle class offers hundreds of millions of potential new customers.
However, tapping that potential is costly and companies have struggled to make a profit. Fierce competition has food-delivery startups racing to sign up restaurants, hire motorcycle delivery drivers and offer discounts on popular dishes. They also need to spend big on advertising to convince consumers to try a relatively novel way of purchasing food.
Berlin-based Delivery Hero on Friday said buying Woowa would expand its presence in Asia and solidify its position as the largest food-delivery platform outside of China by number of orders.
The deal comes as Dutch firms Takeaway.com NV and Prosus NV battle to take over U.K. food-delivery platform Just Eat PLC—a firm now valued at more than $6 billion—and shortly after Amazon invested in another British highflier, Deliveroo.
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Seoul-based Woowa, which launched in 2010, is South Korea’s largest online food-delivery service. The company, which does business under the brand name Baedal Minjok, has more than 8 million monthly active users and fulfilled 365 million orders in the 12 months ended September.
Under the terms of the deal, the companies will establish a joint venture in Singapore to compete across Asia with SoftBank Group Corp. -backed Grab Holdings Inc., UberEats and Indonesia’s Gojek Group.
Despite the presence of several platforms in the region, Woowa founder Bongjin Kim said the South Korean market was “still in the very early stages of development,” with the majority of customers ordering food by phone.
As more consumers across Asia get online and grow accustomed to e-commerce and digital payments, investors are betting billions that they will also turn to apps for sustenance.
To fund the fast-growing industry, investors poured $8.2 billion into food-delivery startups in 2018, according to PitchBook, a market intelligence firm.
Asia has been a particularly popular focus for investment, dominated by firms like Grab, the southeast Asian ride-hailing company.
Grab, which offers a service called GrabFood, last year took over Uber’s business in the region. Earlier this year, it raised $1.46 billion from Japan’s SoftBank in a deal that valued the company at $14 billion.
Another European service, Deliveroo, has also expanded in Asia. In Singapore it has opened a kitchen service for multiple restaurants where customers order through the Deliveroo app and dine under one roof. Earlier this year it raised $575 million in a funding round led by Amazon to fuel expansion. However, that deal has since attracted scrutiny from Britain’s antitrust watchdog.
At the same time, Deliveroo has pared back some of its business in Europe, shuttering its operations in Germany earlier this summer, where it faced stiff competition from Takeaway.com’s Lieferando brand, as well as Delivery Hero.
—Newley Purnell contributed to this article
Write to Sara Germano at sara.germano@wsj.com and Parmy Olson at parmy.olson@wsj.com
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Global Food-Delivery Battle Heats Up With $4 Billion Deal - The Wall Street Journal
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