Billionaire Hiroshi Mikitani’s e-commerce giant Rakuten Inc (TYO:4755) has decided to expand its reach by purchasing the messaging and calling service Viber for $900 million in a move in to social networking.
With the announcement, Mikitani said that Viber will present Rakuten Inc (TYO:4755) with the opportunity to distribute its digital offerings and to create a game platform for a 300 million (and growing) user base.
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Combining messaging and shopping is nothing new. Naver Corp (KRX:035420) does it with Line as does Tencent Holdings Ltd (HKG:0700) with WeChat. In Rakuten’s business model is the desire to see 70% of its business come from overseas, and Viber may be the perfect springboard.
For two consecutive years, Rakuten Inc (TYO:4755)’s properties have missed analysts’ expectations. Its book seller Kobo, however, is primed to change that.
“As smartphones become a more important communication tool than personal computers, Rakuten needs to find a way to link smartphones to its businesses,” said Naoki Fujiwara, a Tokyo-based chief fund manager at Shinkin Asset Management Co. in a recent interview with Bloomberg. “This deal is probably aimed at linking the two.”
Rakuten has ample cash
If all goes well, the acquisition is expected to be completed sometime in March through bank financing though Rakuten Inc (TYO:4755) has roughly $3.4 billion in cash and near-cash items as of last September.
“There was a sense that we can accelerate the growth of our company by tapping into Rakuten’s user base in various countries,” said Viber Chief Executive Officer Talmon Marco, a co-founder whose family owns 11.4 percent of Viber Media.
“Viber understands how people actually want to engage and have built the only service that truly delivers on all fronts,” Mikitani said in a statement. “This makes Viber the ideal total consumer engagement platform for Rakuten.”
Just ask Facebook, who was rebuffed to the tune of $3 billion by Snapchat at the end of last year.