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Japan's Rakuten to buy cash-back site Ebates for $1 billion
Rakuten CEO Hiroshi Mikitani announces the deal for San Francisco rebates website Ebates in Tokyo. (Noriyuki Aida / Bloomberg News)
By Chad Garland
Business Mergers, Acquisitions and Takeovers Consumer Goods Industries
Rakuten Inc. is buying Ebates Inc. of San Francisco for $1 billion in cash, expanding the Japanese e-commerce company’s global reach.
Rakuten, the top Internet retailer in Japan, said it “aims to create the world’s largest product lineup ranging from niche to luxury products,” and will use Ebates to offer points rewards and cash back on its various partner sites.
More than 2,600 merchants and service providers, including Alaska Airlines, Gap and Target, pay Ebates to advertise their products on its membership-based websites in the U.S., Canada, South Korea and China.
Members who make certain online purchases can then qualify for cash-back incentives. The company also operates FatWallet.com and AnyCoupon.com, which offer coupons, discounts, rebates and other online savings deals.
Ebates is a privately held business founded by two lawyers in 1998 and backed by venture capital firms August Capital, Canaan Partners and Foundation Capital. Rakuten said it plans to buy all 32.852 million shares of Ebates’ voting stock in the deal.
Rakuten said Ebates has 2.5 million active members who are increasing their shopping activity. It also said members spent $2.2 billion on Ebates sites last year, generating a profit of $13.7 million on revenue of $167.4 million in fiscal 2013.
Kevin Johnson, chief executive of Ebates, said the company was preparing to go public when Rakuten proposed the acquisition. He said joining forces “was actually a pretty easy decision for us.”
“E-commerce is more competitive all the time, especially internationally,” Johnson said. “We’d much rather compete with a partner like Rakuten than on our own.”
Like Ebates, Rakuten operates membership-based shopping platforms with a loyalty rewards program. Its businesses also include travel and hotel booking sites, online financial services and digital content providers.
The company’s portfolio also extends beyond online services and includes a professional baseball team.
Founded by Hiroshi Mikitani in 1997, Rakuten launched its online shopping mall Rakuten Ichiba with six employees and 13 merchants.
The company made its first investment in the U.S. in 2005 with the purchase of the online marketing firm LinkShare Corp. of New York.
Rakuten began expanding its online shopping business outside Japan in 2008 and in 2010 acquired U.S. e-commerce site Buy.com.
Among Rakuten’s global acquisitions in recent years are a Canadian ebook company and a video-on-demand provider in Spain. It also led a $100-million funding round for the online bulletin board Pinterest in 2012.
Forbes lists Mikitani, a Harvard MBA, as Japan's fourth-richest person, with net worth of about $7.7 billion.