Dear ladies and gentlemen welcome to the conference call of Delivery Hero SE. As our customers request this conference call will be recorded. As a reminder all participants will be in a listen-only mode. After the presentation there will be an opportunity to ask questions. If any of participants have difficulty hearing the conference please press star followed by zero on your telephone phone operator for assistance. May I now hand you over to Daniel Fard-Yazdani. Please go ahead, sir.
Thank you. Good afternoon. Good evening, or good morning, depending on where you are here from Berlin. Thank you for joining on arguably short notice for this call. You've all seen the news that went out a bit earlier, and I will keep this introduction very short. Before I hand over to Niklas, just being mindful of the time here. We had to squeeze this call in, obviously. We are a little bit pressed for time later on for the Q&A. We will maybe only have 10, 15 minutes. Therefore, apologies in advance. We are available also after the call, needless to say. The people who ask a question, can we please ask you to limit it to one? We also ask for your understanding that we will try not to have follow-ups so that we get a couple of questions at least.
With that, I would like to hand over to Niklas, and Emmanuel, of course, is also on the call to answer questions later on. With that, Niklas, to you.
Thank you, Daniel. Good afternoon, everyone. Given the recent news in Korea, we wanted to give you the chance to hear some context around this and outline the current situation. We can confirm having received this so-called examiner's report from the Korea Fair Trade Commission or KFTC earlier this week in respect to the joint venture and strategic partnership with Woowa. In the examiner's report, the KFTC case team proposes approval of the transaction. The proposal is on structural remedies as a condition for approval of the transaction. As such, they recommend that divestment of our South Korean subsidiary, Delivery Hero Korea, also called Yogiyo. Delivery Hero does not support this proposal. Divesting the company's ownership in one of our Korean assets will not benefit the local ecosystem, and it might weaken Delivery Hero's position to elevate the customer experience for all our Korean users, restaurants, and riders.
Issuing of the confidential examiner's report is part of the overall process. It marks an interim step prior to hearing with a final decision and approval of the KFTC Commission. There is yet no certainty whether KFTC will follow the examiner's suggestion to divest Yogiyo or request other remedies from Delivery Hero for the approval of our joint venture. We will submit our response to the recommendations presented by the case team. The KFTC commissioners will make their final decision following one or two hearings in which both Delivery Hero and the case team will present their respective positions before the KFTC. The timing and content of the KFTC decision is currently not determined, depending on whether one or two hearings will take place. It is possible that the final decision from KFTC will not be taken before year-end 2020, but delay the process by a couple of months.
The examiner's report is to be considered as a recommendation for the KFTC commission to approve the transaction subject to potential remedies prior to the first hearing. This is a recommendation and not a final decision by KFTC. If the KFTC commission would request a sale of Yogiyo, and if we would approve such remedy, the impact on our revenue will be less than 10% prior to Woowa. Significantly less if we include Woowa in this. As I said, it's less than 10% prior to Woowa. The % is declining as it's a slow-growing business, but it's highly profitable and will therefore cost us some positive EBITDA contribution. Again, this assumes, one, we cannot influence KFTC commission to change the remedy suggestion from the examiner's report, which we are confident we can, and two, that we would accept the proposed remedy.
Would also like to point out that at no point did the company nor the management board expect the outcome of the current recommendation of the examiner. We were extremely surprised by this report and the recommendations specified within it. We don't think it's in the best interest of the Korean ecosystem in particular. We always give a realistic view on our expectations concerning the ongoing process.
Having said that, this is a conditional approval, and while we are not pleased with the suggestion, we see it as a starting point for negotiation. On the negative side, again, we now expect the process to take one to three months longer. I would also like to comment on a share trade that I did on November 6th, disposing less than 10% of the direct shareholdings I owned at the time, and significantly less than 5% of my overall position, which includes options.
I made my decision to sell a small portion of my ownership on Thursday evening last week after an 18% rally three days prior, Thursday, as a result of the presidential election in U.S. Please note that the share trade took place well before receipt of the examiner's report, which I was not aware of at any time of the sale. I hope you all know that I would never have conducted this disposal if we or I had expected the viewpoint of the examiner's report. The timing of a share sale by a CEO is never good, but this was, of course, very unfortunate, and it puts me in a very uncomfortable and embarrassing position. I'd like to make clear I'm still a huge believer in the company, and I maintain more than 95% of my shares and options in the company.
Looking ahead, Delivery Hero will continue the discussions with KFTC, and is convinced the outcome of the hearings will be to the company's satisfaction. Again, I'm a huge believer in the company and our growth. With that, I will now open for a few questions.
Thank you, ladies and gentlemen. We will now begin our question- and- answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question's answered before it's your turn to speak, you can dial zero two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question we received is from Giles Thorne of Jefferies. Your line is now open, sir. Please go ahead.
Thank you. I had 10 questions, but I'll ask one.
Thank you.
I would love to ask all 10, Niklas, hypothetically, if you had been offered a year ago, or 18 months ago, the opportunity to secure Woowa with zero antitrust risk on reasonable terms, would you or would you not have wanted to do that? I'm working on the premise that in network effects businesses, you always want to be the big guy. This would have given you a path to being the big guy. I appreciate what's on the table here is not what you planned or wanted or moved towards, but it feels to me that the outcome is still incredibly good.
Well-
So, you want-
Thank you. I'll try to answer as you asked me specifically, and Emmanuel can also answer. First, I'd like to make clear that we are still in negotiation with the KFTC, or we are starting the negotiation. Until now it has been examiners have done their report, and now starts the negotiation. They have made their position clear, and we will now make our position clear, and we think that we have very good arguments, very good grounds, and negotiation just started. I would therefore not like to make clear exactly where my position is. I think in general, a process that takes one year is very bad for a company. If that is in Korea or U.K. or any other place, I think it's a very long time, and I think it's not great.
In that sense, an early or fast process approval would of course have been worth a lot. Now, that has not happened. Now I also want this to be at a good outcome. I will unfortunately have to pass a little bit to what we think is acceptable, what we think is a good outcome. We have said what we think is a good outcome. I've shared my view rapidly that this is impacting us with less than 10%, if we would agree to this, and obviously much less than 10% after a Woowa deal. It might be a slow-growing asset, Yogiyo , but it's a very profitable one. Therefore it's of course very unfortunate if we would have to sell this asset, assuming that we would agree to this remedy.
Understood.
I think the good part is that at least it's more in our control now. Prior to knowing the view of the commissioner or to the examiner's report, sorry, there was way more uncertainty, at least for me and Delivery Hero. Even if we were very confident to get an approval, any doubt of that approval, I think is now gone in my view. Now it's up to us to decide if we agree to this remedy and how we can negotiate them. The starting point is now clear.
The implication of that final sentence, Niklas, is that, and again, I think you're not going to answer me, but would you accept this remedy?
I cannot answer that, as it would also weaken my negotiation position.
Okay. Fair enough.
Now negotiation starts. I know what the worst outcome could be, and I know what I want the preferred outcome, what I think the right outcome for the Korean community should be, and we will try to negotiate it to get to what we think is the best resolution. I cannot answer if we would accept this or not.
Of course. Thank you very much.
Thank you very much.
The next question we received is from Joseph Barnet-Lamb of Credit Suisse. Your line is now open. Please go ahead.
Excellent. Thank you. Thank you, Niklas, for taking my question. I also will only go with one then. With regard to the examiners' proposals, does their proposal stipulate or place any restrictions on who you can sell Yogiyo to? In addition, does it propose any behavioral remedy such as commission caps? Thank you.
Should I answer that, Emmanuel?
I'll jump in here. Excuse me?
Yeah.
Please go for the first. Yeah, go ahead.
You please.
Okay. In terms of restrictions, now I forgot the restrictions in terms of behavior remedies, right?
Who to sell to.
Yeah, no, I think it's too early for us to comment. Far we're not aware of any restrictions, and I don't think they are, but this is too early to say. We will have the first hearing and hear, have the detail around the conditions if a divestiture should take place. Again, I think it's very important for us to make clear this is a recommendation and this is not a decision. That's very important. We will challenge this recommendation from the examiner in front of the Commission. But so far, we're not aware of any restrictions to whom to sell to. Again, we will make sure that we challenge this recommendation.
Besides what we mentioned today in terms of the recommendation to disinvest, we're not aware of further any kind of restrictions or remedies at all, in terms of behavioral remedies at this point of time. Having said that, we are preparing the first hearing and the outcome of this hearing is not known yet, obviously. That's the status quo today that we can share with you.
Excellent. Thank you very much, Emmanuel.
Sure, Joseph.
The next question is from Monique Pollard of Citi. Your line is now open, madam. Please go ahead.
Hi. Afternoon, everyone. I'll stick with one question too, please. Following on about the sale of Yogiyo, what I'm interested in is there any stipulation in the document of the examiner's report as to what happens if you can't find a buyer for Yogiyo? Say you accept this remedy and you try and sell Yogiyo and there's not a buyer, what happens then?
We cannot comment on all the details in the examiner's report. I know there has been cases before in Korea where there has been, or one case at least, where there had been a structural remedy of sale of an asset. The company who wanted to sell could not get an agreeable price, and they went back to the KFTC and got approval for not selling the asset, as far as I'm aware. I think that's the case that I have in mind, that there has been a case where KFTC then afterwards reversed the decision based on a non-acceptable outcome. Of course, every case is individual, and I cannot comment on our specific case. I can only refer back to what has been done in the past in this occasion.
Okay. Understood. Are you able to give who that case related to?
I forgot now the name. If someone can help me out here, then please. I don't dare to say now because I got a little bit unsure which company it was or the name of it.
Can you repeat? Sorry.
We will have to come back on that. I cannot remember the company.
Okay, got it.
I'll see if I can find it by the end of the call.
Okay. Thank you.
The next question we received is from Andrew Ross of Barclays. Your line is now open. Please go ahead.
Great. Thank you, and good afternoon, everyone. I wanted to ask about the conditions of a break on the Woowa side, and I guess I'm thinking that if the KFTC were to follow the examiner's recommendation and you're forced to sell Yogiyo, can the Woowa guys walk away? Are there any clauses in place that would prevent a hostile bid for Woowa, given that at that point, the two to one would be off the table and it would really be a question of the highest bidder? Thanks.
No, we don't see this as a potential outcome. No.
Fair enough.
If I understood the question correctly, if we for some reason would not agree to such a remedy, Competing bidders will know that we have a share purchase agreement in place, and we're awaiting the approval from the Commissioner or KFTC Commission. Until that has been approved and we have agreed to it, there is no possible implication there.
I think in general, it's fair to say that basically, if we get the kind of conditional approval, that if we're happy to say, if we agree to this remedy that is mentioned by the examiners today, which we would challenge, we will be able to close the transaction or to start to close the transaction. Basically, now this is challenging this remedy, because we think this is not a good one for the ecosystem and we want to challenge it. This is also a sign that basically this transaction can be approved by, from the point of view of the examiners, by the KFTC, by the commission.
To follow up on that, obviously, I'm not a lawyer, does that share purchase agreement definitely prevent the Woowa guys from walking? Is there some kind of break fee under which they could? I guess one of the reasons to go with Delivery Hero was merger synergies, and if that can't happen, maybe their take might be different.
The way we see it, no. We are in full alignment also with Woowa, that we are going to get this through. I don't want to go into the specifics of the SPA, but, no, the way we see it, no.
I think it's also fair to say that with Woowa, we share a view that this is far more than Korea. I think with Woowa, we have this goal that we want to continue to build this great company together. It's not limited to Korea. I think that's also very important to keep in mind.
Got it. Thanks, guys.
Right. I know some people will hate me for saying this, and because we see we have more people in the line, but as I said earlier, we had to squeeze this in on short notice in between. I'm sorry, we have to cut it off here. We have the names who still wanted to ask a question, and Chris and I will get back to you in due course. Therefore, thank you all for dialing in.
We have one more question. I have time for one more.
Oh, okay.
Take one more, that's fine.
Operator, we can take the next in line.
The next question received is from Andrew Gwynn of Exane. Your line is now open. Please go ahead.
Hi there. Good afternoon. Very quickly, could you just align or tell us why the examiner, their approach is that this is bad and you think it's good? Just to help us understand really where this sort of misalignment in opinion is. Thank you.
I think like the rational thinking behind it is not explained to us so far from what we understand. We will have to dig into the report that they send us even more in order to prepare the hearing. The rationale, we can't follow so far. As we said, we think this is not a benefit for the ecosystem, but we don't recognize the kind of rationale and reason why so far. We'll have to be part of the preparation of the hearing, obviously.
I think the reason why-
Okay, thanks. Good luck.
It's a huge value for the society or for the community is we can partner up. We will have more resources to invest. We can add logistics to a better extent, more effectively at better terms. We think that we can combine, have a much better user experience. We can drive on innovation. There is a lot in agreement that also goes into investments, both from a fund point of view into startups and much more. We think that there are an enormous amount of value, and I think it would significantly strengthen both from an ordering restaurant and I think rider and rider community. We obviously have a different view here. We don't see this as a good solution for the society, and that's also what we really want to drive.
We want to drive a good solution for everyone involved, and we think this is not to achieve that. As Emmanuel said, we cannot answer for them at this point in time. Thank you very much, everyone, for listening in. I appreciate all your support. As I said, we do not like the outcome of the report, but this is a starting point in the negotiation. I think on the positive, at least for Delivery Hero's point of view, is that now we know what the range of outcome is, and it is a more thin range of outcome than before because we believe that at least we are in a position where we can decide or not.
We feel in this sense, more in control, even if we don't necessarily like the remedies that are suggested, then we will negotiate and try to find a better solution. It gives a lot of certainty for us in our negotiation with the KFTC that starts now.
Thank you, everyone.
Thank you.
For joining. Bye-bye.
Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.