Rakuten Jumps Most in 5 Months After Deal to Buy Ebates

Rakuten Chairman Hiroshi Mikitani
Scott Brady, chief executive officer of Slice Technologies Inc., from left, Billionaire Hiroshi Mikitani, chairman and chief executive officer of Rakuten Inc., Kevin Johnson, chief executive officer of Ebates Inc., pose during a photo session at a news conference in Tokyo. Photographer: Noriyuki Aida/Bloomberg

Rakuten Inc. rose the most in five months after it agreed to buy U.S. rebates website Ebates Inc. in Japan’s largest e-commerce deal, a move that will more than double the e-retailer’s transactions from overseas.

Rakuten will pay $1 billion in cash for all of Ebates, it said yesterday. San Francisco-based Ebates offers cash rebates to customers who buy products ranging from laptops to lipsticks from the website’s retail partners.

Rakuten’s billionaire Chairman Hiroshi Mikitani is betting the purchase will help the Tokyo-based company push its global e-commerce strategy. Rakuten has also been investing in technologies such as mobile applications and online video as it seeks to add to its online marketplace business.

“This deal doesn’t just mean we’ve started a cash-back website in the U.S., I think we can operate this model all over the world,” Mikitani told reporters at a briefing in Tokyo yesterday. The purchase will lift the proportion of Rakuten’s e-commerce transactions from outside Japan to 16 percent from about 6 percent now, he said.

Rakuten, which operates Japan’s biggest online mall, aims to raise the proportion to 50 percent around 2020, said Mikitani, Japan’s fourth-richest man with a net worth of about $6.9 billion according to the Bloomberg Billionaires Index.

The shares rose 4.9 percent to 1,316 yen, the biggest gain since April 16, at the close of trading in Tokyo, while Japan’s benchmark Topix index increased 0.6 percent.

Points Program

“Rakuten’s acquisition of Ebates is a positive in strategic terms,” Yoshitaka Nagao, an analyst at Nomura Holdings Inc., said in a report dated yesterday. “Ebates’ operational expertise in areas such as customer delivery will help Rakuten’s overseas expansion.”

The company wants to create with Ebates a membership-based marketplace with “the world’s largest product line-up” ranging from niche to luxury items, and featuring a points program, Rakuten said. The potential impact on its earnings from the acquisition is “difficult to estimate,” it said.

Ebates, which has 2.5 million active members and more than 2,600 retailers in its network, posted operating income of $13.7 million on net revenue of $167.4 million in fiscal 2013, Rakuten said. Members spent $2.2 billion shopping through Ebates last year.

Viber Purchase

“Joining forces with Rakuten will help accelerate our U.S. and international growth,” Kevin Johnson, chief executive officer of Ebates, said in a Rakuten statement distributed by Businesswire.

The deal comes after Rakuten announced 18 acquisitions since the start of last year, and the cybermall operator said in June it’s open to more large-scale deals following its bond debut. Rakuten bought messaging service Viber Media Inc. for $905 million in March, Japan’s biggest e-commerce deal at the time, according to data compiled by Bloomberg.

The company, founded by Mikitani in 1997, was an acquirer in three of the top 10 e-commerce deals in Japan before the Ebates purchase was announced, the data shows.

As of June 30, Rakuten had about 1.7 trillion yen ($16 billion) in cash and short-term investments, according to data compiled by Bloomberg.

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