Food delivery unicorn Line Man Wongnai is in talks to acquire Delivery Hero SE’s Foodpanda in Thailand as it plans for a stock-market debut in the next few years, according to people familiar with the discussions.
Food delivery unicorn Line Man Wongnai is in talks to acquire Delivery Hero SE’s Foodpanda in Thailand as it plans for a stock-market debut in the next few years, according to people familiar with the discussions.
Bangkok-based Line Man Wongnai considered a deal at around US$100 million at one point, but the value is likely to have changed with the deterioration of the wider market and internal views toward loss-making businesses, said one of the people, who asked not to be named as the matter is private. The company is backed by Line Corp and Singapore sovereign wealth fund GIC Private Limited.
No final decision has been made and talks could still fall through, the people said. Representatives for Line Man Wongnai and Line declined to comment. Representatives for Delivery Hero and Foodpanda did not immediately respond to requests for comment.
The potential takeover would bolster Line Man Wongnai’s pursuit of a spot among Thailand’s top online shopping platforms. Southeast Asia’s second-largest economy counts Line as its most popular messenger app. Tokyo-based Line merged with SoftBank Group Corp’s Z Holdings Corp in 2021 and is a major shareholder of Line Man Wongnai.
Line Man Wongnai was formed in 2020 from the merger of delivery service Line Man and restaurant review platform Wongnai. Its valuation topped $1 billion when it raised $265 million this year. Grab Holdings Ltd and Foodpanda are its biggest competitors in Thailand.
The move comes as Berlin-based Delivery Hero is seeking to accelerate a plan to reach profitability by 2023. Chief Executive Officer Niklas Oestberg suggested during a conference call a month ago that while his company has a strong position in countries such as Malaysia and the Philippines, it may exit in some markets where it’s not No. 1. “We are not looking to sell our Southeast Asia business, but there may be markets in Southeast Asia, or in other regions, where we are in discussions,” he said.
That has triggered speculations whether ride-hailing and food delivery giant Grab may consider acquiring some assets. Grab’s chief financial officer, Peter Oey, said during an earnings’ call last month that Grab is focused on “organic growth” instead. “Cash preservation is critical for us,” he said in response to questions from analysts. “Our bar on M&A is extremely high.”
The biggest recent consolidation move in the sector came last week when Turkey’s Getir acquired Berlin-based Gorillas Technologies GmbH for $1.2 billion.
Pawoot Pongvitayapanu, an e-commerce pundit and founder of Tarad.com, a local e-commerce solutions provider, said the deal makes sense as Line Man Wongnai can purchase Foodpanda in an inexpensive value as the latter has been racking up losses despite a decade of its business in Thailand.
Shareholders of Foodpanda may want to sell its operation in Thailand to gain some money back and compensate employees in the possible lay-off, Mr Pawoot said.
He said that after the acquisition, Line Man Wongnai may have to find ways to lean its organisation to reduce work duplications.
In 2021, Line Man Wongnai and Foodpanda had 32.6% and 23.4% market shares in terms of revenues, respectively. Their bigger rival Grab had a 44% market share.
The acquisition of Foodpanda would make Line Man Wongnai become the market leader in food delivery.
“Line Man Wongnai will become stronger in the upcountry and grocery delivery as well as gain more restaurants and foreign customers from Foodpanda,” said Mr Pawoot.
In 2021, Line Man Wongnai racked up 3.4 billion baht in losses while Foodpanda by Delivery Hero (Thailand) registered 4.7 billion baht in losses.
The consolidation of the two big players would potentially drive Grab to fight back. Line Man Wongnai and Grab will dominate the market, while other smaller players are Robinhood and AirAsia.
According to people familiar with the deal, the acquisition plan is expected to be announced by this month.
Anantaporn Lapsakkarn, a senior researcher at Kasikorn Research Center (K-Research), said the deal is likely to be a strategic buyout by Line Man Wongnai to gain more customers, restaurants and driver partners.
Foodpanda has been operating more than a decade in Thailand with a large customer base and its grocery delivery service Pandamart is growing well, he said.
“The deal will reduce one competitor in the market with key rival being only Grab,” he said.
Line Man Wongnai has experienced a strong growth in order transactions in 2022 following its expansion in the upcountry, which is now close to Grab, Mr Anantaporn said.
In 2022, food delivery business continues to grow following expansion into district areas, he said.
The market is expected to soften next year as it approaches maturity, and the economic turbulence continues.
According to K-Research, Thailand’s online food delivery market is expected to see a double-digit growth this year while order transactions are forecast to rise 44%, which is slower than last year in the Covid-19 pandemic.
