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Business deals

Rakuten lands $2bn in capital from Tencent, Walmart and Japan Post

Move helps Japan online group strengthen mobile business and take on Amazon

Rakuten, which began as a platform for online retailers, is teaming up with Japan Post as it endeavors to become a bigger player in Japan's digital economy. Walmart and a Tencent subsidiary are investing in its latest expansion. (Source photos by Arisa Moriyama, Kosaku Mimura and Reuters)

TOKYO -- Japan's Rakuten on Friday announced it plans to raise 242 billion yen ($2.2 billion) by issuing new shares to Japan Post Holdings, Walmart and an investment firm backed by China's Tencent.

Japan Post Holdings will invest 149.9 billion yen this month, taking a stake of around 8% in the e-commerce group and becoming its fourth-largest shareholder. Image Frame Investment, the Tencent Holdings' subsidiary, agreed to pay 65 billion yen for a stake of 3.65%, while Walmart is purchasing over 16 billion yen worth of shares for a 0.92% stake.

Rakuten plans to use the funds to strengthen its mobile carrier business as well as develop an efficient logistics platform.

"This will be the first time since our founding that we receive such a large investment," Rakuten's billionaire founder and CEO Hiroshi Mikitani told a news conference.

Two other companies will also participate in the third-party allotment.

Rakuten aims to explore business opportunities in a bid to grow its consumer-focused ecosystem, which has more than 70 services, including online retailing, a mobile carrier, digital content and fintech.

Tokyo-listed shares in Rakuten rose by as much as 11% Friday, touching the highest level since July 2019.

Rakuten and Japan Post Holdings had already signed a partnership in December with the aim to form a sustainable logistics system that could exploit digital technology to help solve issues like delivery personnel shortages.

"We aim to create a new logistics platform by utilizing our nationwide delivery network and Rakuten's digital technologies," Japan Post Holdings President and CEO Hiroya Masuda told reporters on Friday.

The company can reach households anywhere in the country with its nationwide network of post offices. Rakuten boasts roughly 100 million Japanese users of its online shopping site.

Rakuten Chairman and CEO Hiroshi Mikitani poses with Japan Post Holdings President and CEO Hiroya Masuda. (Photo by Yumi Kotani) 

Through the partnership, which also includes Japan Post Holdings' mail delivery arm, the companies will work toward sharing facilities and improving operational efficiency through the use of consumer data and artificial intelligence. They also plan to develop delivery drones and other next-generation technologies.

Rakuten officially began its mobile carrier business last year. The service so far has gathered 3 million users, most of whom signed up online. In a bid to continue increasing its user base, Rakuten hopes to set up counters in post offices. It also has designs on bolstering its marketing by using its partner's delivery network.

Japan Post Holdings' Masuda expressed confidence that the partnership will eventually lead to "tie-ups in other areas like finance and e-commerce." He noted that the companies plan to hash out further details and make an announcement sometime in April.

The collaboration comes amid increasing demand for deliveries as the coronavirus pandemic keeps consumers at home and shopping from their smartphones and other gadgets.

This is not the first time for Rakuten to shake hands with Walmart. In 2018, Walmart announced it was teaming up with Japan's big online player to operate a supermarket website and launch a digital bookshop that would make use of Rakuten's Kobo e-reader.

Rakuten holds about a 20% stake in Japanese supermarket chain Seiyu, which it jointly operates with Walmart.

Meanwhile, Rakuten has been emulating Tencent by operating a cashless payment service. More recently, the Chinese internet group has made a gradual push into e-commerce with the launch of its WeChat mini shop, which allows entrepreneurs and companies to set up online stores.

In a statement, Rakuten said Tencent's 65 billion yen investment will strengthen the companies' relationship and allow Rakuten to enrich its services by collaborating with its Chinese partner. The companies are considering joining forces in digital entertainment and e-commerce.

Rakuten also intends to use the funds to expand its cellphone and other businesses as it seeks an edge against Amazon and other competitors.

"Digital transformation is accelerating more than ever due to COVID-19," Mikitani said. "I hope our partnership grows even more in various ways as we try to merge the real with the virtual."

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