DHER To Buy Korea's Biggest Delivery App, Delivery Hero Had to Sell Its Own

A €5.7 Billion Deal That Cost Delivery Hero Its Own Korean Business

Delivery Hero's 2020 annual report covers a genuinely strong operating year by the numbers: orders nearly doubled (+95.8%) to 1,304.1 million, GMV^» grew 66.2% to €12,360.9 million, and Total Segment Revenue grew 94.8% to €2,836.2 million - beating the company's own raised guidance range of €2.6-2.8 billion. But the single most consequential fact in this report isn't in the headline growth numbers at all - it's a disclosure buried in the "disposal group held for sale" footnote: in December 2020, the Korea Fair Trade Commission (KFTC) imposed, as a condition of approving Delivery Hero's acquisition of Woowa Brothers Corp. (the operator of Baedal Minjok, South Korea's largest food-delivery platform), a "structural remedy" requiring Delivery Hero to sell its own pre-existing Korean business, Delivery Hero Korea LLC ("DHK," operating as Yogiyo). Delivery Hero accepted, and as of December 31, 2020, DHK sits on the balance sheet as a disposal group held for sale (€132.6 million of assets, €117.0 million of liabilities), with a sale expected sometime in 2021. The Woowa transaction itself - approximately 88% of Woowa's shares for a consideration of roughly €5.7 billion (€1.7 billion cash, €4.0 billion in new Delivery Hero shares, and a €27.1 million contingent component) - didn't actually close until March 4, 2021, after this reporting period ended. So the deal that will define Delivery Hero's next several years wasn't even consolidated in the numbers below; what this report does show is the price of admission: giving up an entire existing Korean business to be allowed to buy a bigger one.

The Prescription

Delivery Hero should keep compounding category-leadership acquisitions funded by the same low-cost convertible capital it's used since January 2020 - Woowa in Korea, the accelerating Glovo consolidation (a 36.0% stake by year-end, rising further to 37.4% in a subsequent-event financing round), and InstaShop in MENA grocery. MENA's full-year adjusted EBITDA margin recovering to +11.0% (from +6.0% in 2019, and still below the +15.6% it posted back in FY2017) is proof the playbook - own-delivery investment funded by scale, followed by margin discipline once density is reached - genuinely works when given enough time in one region; the task now is repeating it in Asia and the Americas, which are still deeply loss-making.

What it should stop doing is treating a regulator-mandated forced divestment of an entire existing national business as a routine footnote alongside inventory write-downs and lease reclassifications. The KFTC's structural remedy is disclosed accurately in this report - nothing here is concealed - but it gets a few paragraphs in a note titled "Disposal group held for sale," while the Woowa acquisition itself gets celebratory treatment in the CEO letter and a full page in Subsequent Events. A reader relying on the narrative sections alone would come away thinking Delivery Hero simply added Woowa to its Asian footprint; the reality is closer to a swap, at a real (if not yet fully quantified) cost, and that tradeoff deserves the same prominence as the deal it was the price of (see Beyond the Usual).

Key Financial Metrics

FY2020 vs. FY2019, continuing operations unless noted, reported in EUR (FY2020 also shown in USD)

FX: EUR 1 = USD 1.2300 (December 30, 2020 close, the last trading day of this period).

Metric	FY2020 (EUR)	FY2020 (USD)	FY2019 (EUR)	YoY
Revenue	€2,471.9M	~$3,040.4M	€1,237.6M	✅ +99.7%
Total Segment Revenue (before vouchers)	€2,836.2M	~$3,488.5M	€1,455.7M	✅ +94.8%
Gross profit	€494.2M	~$607.9M	€311.2M	✅ +58.8%, margin fell to 20.0% from 25.1%
Adjusted EBITDA (total segments)	-€567.7M	~-$698.3M	-€430.9M	⚠️ loss widened 31.8%
Operating result	-€894.2M	~-$1,099.9M	-€648.0M	⚠️ loss widened 38.0%
Net loss, continuing operations	-€1,402.7M	~-$1,725.3M	-€689.9M	⚠️ loss widened >100%
Net result (incl. discontinued operations)	-€1,402.7M	~-$1,725.3M	€230.2M	⚠️ swung to loss - FY2019 included a €920.2M one-time gain on the German business/Takeaway.com deal
Cash flow from operating activities	-€530.0M	~-$651.9M	-€364.8M	⚠️ outflow widened 45.3%
Free cash flow (proxy: OCF less capex)*	-€738.1M	~-$908.0M	-€459.9M	⚠️ outflow widened
Cash and cash equivalents (period-end, incl. disposal group)**	€2,977.1M	~$3,661.8M	€699.4M	✅ +325.7%

*Delivery Hero doesn't report free cash flow^» as a defined metric; the figure above is operating cash flow less capex - payments for property, plant and equipment (-€169.0M) and intangible assets (-€39.1M) in FY2020. **€54.9 million of this balance is held within the Delivery Hero Korea disposal group classified as held for sale (see Beyond the Usual); the balance sheet line "cash and cash equivalents" excluding that group shows €2,922.2M.

Balance sheet	Dec 31, 2020	Dec 31, 2019	Change
Total assets	€5,774.3M	€2,672.7M	✅ +116.1%
Total equity	€1,168.5M	€1,869.5M	⚠️ -37.5%
Total liabilities	€4,605.8M	€803.2M	⚠️ >100%, mostly the convertible bonds

Gross margin compression (25.1% → 20.0%) continues the pattern flagged at H1 2020: own-delivery expansion and the Dmart rollout keep absorbing revenue growth before it reaches the EBITDA line. Every absolute-euro loss figure widened again in the second half - the adjusted EBITDA loss went from -€319.8 million at H1 to -€567.7 million for the full year, meaning H2 alone added roughly -€247.9 million, a wider second-half loss than the entire first half of 2019 (-€171.1 million). Equity fell 37.5% almost entirely because of the €1,402.7 million net loss flowing straight through retained earnings - a genuine erosion of the balance sheet's equity cushion that the €3.25 billion of convertible-bond financing raised in the same year doesn't offset, since convertible debt sits in liabilities, not equity, until conversion.

Total Segment Revenue beat Delivery Hero's own raised guidance range for the year, and MENA posted its best full-year adjusted EBITDA margin since FY2017 - but net loss more than doubled, equity shrank by more than a third, and the year's single biggest strategic event (Woowa) hadn't even closed yet as of this report's balance sheet date.

Key Operational Metrics

Actual reported figures unless noted

Metric	FY2020	FY2019	YoY
Orders	1,304.1M	666.0M	✅ +95.8%
GMV	€12,360.9M	€7,435.4M	✅ +66.2%
Implied take-rate (Total Segment Revenue ÷ GMV)	22.9%	19.6%	✅ up - Integrated Verticals' gross-basis revenue recognition (see H1 2020 post) continues to lift this ratio mechanically
Average employees (full year)	29,552	23,436	✅ +26.1%

Orders grew faster than GMV for the second straight reporting period (95.8% vs. 66.2%), the same order-composition shift toward smaller, more frequent grocery and quick-commerce baskets first flagged at H1 2020, not a reversal. Average headcount growth (26.1%) still ran behind order growth, continuing the multi-year operating-leverage pattern on delivery-personnel hiring - though the gap narrowed meaningfully from the H1 2020 comparison, consistent with a full year of Dmart and rider-network buildout requiring genuinely more people, not just more automation.

Segment Results

FY2020, five reportable segments (four regional plus Integrated Verticals, introduced January 1, 2020); FY2019 comparatives shown on the new structure

Segment	Revenue (FY'20)	YoY	Adj. EBITDA (FY'20)	Adj. EBITDA margin	FY'19 margin
MENA	€894.3M	✅ +24.8%	€98.6M	✅ +11.0%	+6.0%
Asia	€1,196.0M	✅ +162.6%	-€456.1M	-38.1%	-68.5%
Europe	€323.1M	✅ +86.5%	-€2.2M	-0.7%	-10.9%
Americas	€257.4M	✅ +133.1%	-€143.1M	⚠️ -55.7%	-129.5%
Integrated Verticals	€183.6M	new segment	-€64.9M	-35.3%	n/a (new)

MENA's full-year margin (+11.0%) confirms the recovery first seen at H1 2020 wasn't a one-off - it's Delivery Hero's best full-year MENA margin since FY2017 (+15.6%), and continues the segment's long run as the only one to post a positive full-year margin in every year since the 2017 IPO. Asia's margin improved by 30 points to -38.1% but remains the segment posting Delivery Hero's largest absolute-euro loss by a wide margin (-€456.1 million, roughly 80% of the total segment adjusted EBITDA loss), reflecting the scale of investment behind its 162.6% revenue growth. Americas showed the largest percentage-point margin improvement of any segment (from -129.5% to -55.7%) but remains the weakest on a relative basis. Europe came within a rounding error of breakeven for the year (-0.7%). None of these regional trends yet include Woowa, which will report inside Asia once consolidated from March 2021.

Beyond the Usual

An antitrust remedy that costs Delivery Hero its own Korean business

To secure the KFTC's approval of the Woowa transaction, Delivery Hero accepted, in December 2020, a structural remedy requiring it to sell 100% of Delivery Hero Korea LLC ("DHK," operating under the Yogiyo brand) - the Korean food-delivery business Delivery Hero already owned before agreeing to buy Woowa. DHK is presented as a disposal group held for sale as of December 31, 2020 (assets of €132.6 million, liabilities of €117.0 million), with efforts to find a buyer underway and a sale expected within 2021. This means the actual net effect of the Woowa transaction on Delivery Hero's presence in Korea isn't "gained a new asset" - it's "traded an existing, wholly-owned Korean marketplace for a roughly 88% stake in a larger one," at a price (€5.7 billion) that was set assuming Delivery Hero would keep both. The report doesn't disclose an expected sale price for DHK, so the net cost of this swap - Woowa's purchase price, less whatever DHK eventually sells for - can't yet be calculated from what's public.

Buying Woowa required giving up Delivery Hero's own pre-existing Korean business as an antitrust condition - a real, negotiated tradeoff disclosed accurately in a footnote, but one that changes what "acquiring Woowa" actually means for Delivery Hero's Korean market position, and it's worth watching how the eventual DHK sale price compares to what Delivery Hero originally paid to build that business.

A €192.9 million non-cash swing tied to the convertible bonds themselves

The Convertible Bonds II placed in July 2020 include a contingent cash settlement option that IFRS classifies as an embedded derivative requiring separate fair-value measurement, initially recognized at €196.0 million. Remeasuring that derivative through year-end produced a €192.9 million fair-value loss, the single largest driver of the swing in "other financial result" from a €93.7 million gain in 2019 to a €334.4 million loss in 2020 (foreign currency translation losses of €161.2 million on intercompany balances contributed most of the remainder). None of this reflects cash leaving the business - it's a mark-to-market of a derivative tied to Delivery Hero's own convertible debt and share price - but it's a real, disclosed reminder that the €3.25 billion convertible-bond raise flagged at H1 2020 carries P&L volatility beyond the interest expense line, tied to how the market prices Delivery Hero's own stock and its takeover-related put rights.

A single derivative embedded in Delivery Hero's own convertible bonds swung the P&L by nearly €193 million this year, a non-cash but real illustration of how much complexity the January-and-July 2020 financing added beyond simple interest cost.

Rider classification and a legacy M&A investigation, both provisioned quietly

Delivery Hero's "Other provisions" note discloses two distinct legal-risk items added or increased in 2020: an unspecified provision "in connection with a previous M&A investigation against DH Group" (an antitrust investigation tied to an earlier transaction), and provisions "for potential obligations with regard to the social security status of riders." Neither is quantified individually, and neither is new in kind - rider employment classification is a well-known industry-wide legal exposure across food-delivery platforms globally, not something specific to Delivery Hero - but this is the first time Delivery Hero's own filings have explicitly acknowledged provisioning against it, rather than only discussing rider relationships in operational terms (safety, retention, the pandemic rider fund mentioned at H1 2020).

Delivery Hero is now provisioning, even if not separately quantifying, against both a legacy antitrust investigation and rider social-security classification risk - two distinct legal exposures worth tracking as they develop in future reports.

Nearly €5 billion of goodwill on a €5.7 billion deal

The preliminary purchase price allocation for the Woowa transaction (disclosed as a subsequent event, since the deal closed March 4, 2021) allocates €5,720.0 million of total consideration against €757.4 million of identifiable net assets - of which only €986.1 million is recognized intangible assets (customer relationships, brands, technology) - leaving a residual goodwill of €4,962.6 million, or roughly 87% of the entire purchase price. Goodwill this large relative to identified intangibles isn't unusual for a platform acquisition where most of the value is workforce, market position, and network effects that IFRS doesn't let a company separately capitalize - but it does mean nearly nine-tenths of what Delivery Hero paid for Woowa sits on the balance sheet as an asset whose only future test is an annual impairment review, not amortization that would flow through the P&L on a predictable schedule.

A currency hedge that expired unused after a 15-month regulatory wait

In 2019, ahead of the Woowa deal, Delivery Hero entered a deal-contingent FX option (notional €2.5 billion) to hedge the USD-denominated cash portion of the purchase consideration, with an April 2021 expiry. The KFTC's approval process ran from the December 13, 2019 signing to written regulatory approval on February 2, 2021 and closing on March 4, 2021 - over 14 months. The option itself, per this report's subsequent-events section, "expired unused" just before the deal closed, with its full €47.6 million premium paid regardless. A hedge purchased to de-risk a transaction's timing ended up outliving its own usefulness because the transaction it was hedging took longer to clear antitrust review than the hedge's own term - a genuinely interesting illustration of how expensive protracted regulatory approval can be, independent of the deal's substance.

Glovo's stake keeps climbing toward something bigger

Delivery Hero increased its shareholding in Glovoapp23, S.L. twice within the reporting period covered by this report - a €280.5 million investment during the year bringing the stake to 36.0% by December 31, 2020, then a further €229.0 million subsequent-event investment in March 2021 bringing it to 37.4% on a fully diluted basis. This is the fourth consecutive Delivery Hero report (including the H1 2020 post) to show the Glovo stake increasing - a steady, multi-year accumulation pattern that, while still short of a controlling interest, is the kind of trajectory worth watching for whether it eventually converts into full ownership or a formal joint venture.

Target Valuation Range

The market is implying an enterprise value of roughly €25.49 billion - ~9.0x actual FY2020 Total Segment Revenue, or ~4.2x FY2021 Total Segment Revenue guidance once Woowa is included (2.1x actual GMV) - Delivery Hero's share price nearly quadrupled over two years, largely on the strength of the Woowa deal and COVID-driven growth, but that price was set before Woowa was even consolidated and before the cost of losing DHK to antitrust remedy could be quantified. Call this priced for a very specific, still-unproven outcome rather than fairly or unfairly valued in the abstract. No comparable public peer exists yet and a real DCF still isn't attempted (see below), so these EV/Revenue reads are the numeric anchors this post can offer.

Delivery Hero SE closed the last trading day of 2020 (December 30) at €127.00 per share. With 199,382,465 shares outstanding at year-end, and total interest-bearing obligations (convertible bonds of €2,949.4 million, lease liabilities of €181.9 million combined non-current and current, and the short-term convertible loan portion of €13.1 million) coming to roughly €3,144.4 million, against total group cash of €2,977.1 million (including the DHK disposal group's cash) - a small net debt position of roughly €167.3 million, Delivery Hero's first net-debt balance sheet since well before its 2017 IPO:

Market cap → enterprise value	FY2020
Share price (period-end)	€127.00
Shares outstanding	199,382,465
Market capitalization	€25.32B (~$31.14B)
Total liabilities (convertible bonds + leases + convertible loan)	~€3,144.4M
Less: cash and equivalents	€2,977.1M
Enterprise value	~€25.49B (~$31.35B, net debt ~€167.3M)

Peer-multiple sanity check	H1 2020	FY2020	Change
Revenue basis	H1 2020 annualized / FY2020 guidance	FY2020 actual, €2,836.2M / FY2021 guidance "above €6.1B" (incl. Woowa)	-
Enterprise value	~€17.29B	~€25.49B	⚠️ up
EV/Total Segment Revenue	~6.4x (FY2020 guidance)	~9.0x (FY2020 actual, trailing) / ~4.2x (FY2021 guidance, incl. Woowa)	⚠️ up on trailing basis
EV/GMV	~1.7x (H1 annualized)	~2.1x (FY actual)	⚠️ up, the first meaningful expansion in this multiple across the posts covered so far

No directly comparable food-delivery peer has been covered on this site yet, so a peer-multiple sanity check against another public delivery marketplace still isn't possible for this post.

The share price move across the two years to this period-end is the largest yet covered on this site: from a €32.50 close at the end of December 2018, Delivery Hero shares closed 2020 at €127.00 - up roughly 291% over two years, including the sharp Woowa-announcement jump in late 2019 (flagged at H1 2020) and a continued climb through the COVID-19 period, culminating in the company's August 2020 inclusion in the DAX, Germany's benchmark index of its 30 largest and most liquid listed companies. Delivery Hero has not split its stock since its 2017 IPO, so these remain actual nominal prices, not retroactively adjusted figures.

A real DCF still isn't attempted here. Free cash flow was more negative for the full year (-€738.1 million) than any prior period on record, and - critically - the acquisition that's supposed to justify the current valuation, Woowa, isn't in these numbers at all; any cash-flow projection built on FY2020 figures alone would be modeling the wrong company for what Delivery Hero is about to become.

Delivery Hero spent 2020 becoming a much bigger, much more indebted, much more expensive company - and the one acquisition that will actually determine whether any of that was worth it hadn't even closed by the time this report went to print.

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