Rakuten acquires Ebates in Japan’s largest e-commerce deal

Tokyo: Rakuten Inc. has agreed to buy U.S. discount site Ebates Inc. in Japan’s largest e-commerce deal, as the operator of the country’s largest online shopping mall seeks overseas growth through acquisitions.

Rakuten, controlled by billionaire Hiroshi Mikitani, will pay $1 billion in cash for all of Ebates, it said in a filing with the Tokyo Stock Exchange on Tuesday. San Francisco-based Ebates offers cash back to customers who buy products ranging from laptops to lipsticks from the site’s retail partners.

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

“With the addition of Ebates, Rakuten Group aims to create the world’s largest portfolio of products, from niche to luxury,” Rakuten said in a statement. “The combination of the two companies will create a compelling and innovative membership-based marketplace for consumers, with a points program at its core.”

2.5 million members

Rakuten fell 1.3% to 1,254 yen at the close in Tokyo, its lowest since May 23. The stock has lost 20% this year, compared with a 0.2% decline in the Topix index. The stock fell the most in three months on Sept. 8 on concerns about the deal’s viability, after Rakuten confirmed it was in negotiations.

Ebates, which has 2.5 million active members and more than 2,600 retailers in its network, reported operating income of $13.7 million on net revenue of $167.4 million in fiscal 2013, according to a statement from Rakuten.

Rakuten said Ebates had gross merchandise sales of $2.2 billion, adding that the potential impact of the acquisition on the company’s earnings “is difficult to estimate at this time.”

Mikitani, the fourth-richest person in Japan with a net worth of about $7 billion according to the Bloomberg Billionaires Index, is pouring money into technology such as mobile apps and online video as he seeks to expand Rakuten’s core online marketplace business.

The company, which Mikitani founded in 1997, was the buyer in three of Japan’s 10 largest e-commerce deals before announcing the Ebates purchase, according to data compiled by Bloomberg. 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. Bloomberg