Rakuten to raise $2.2bn in deal with Japan Post, Tencent and Walmart

Rakuten plans to raise $2.2bn through landmark capital tie-ups with Japan Post Holdings, Chinese technology group Tencent and US retailer Walmart, as the Japanese ecommerce company seeks to fend off the threat from Silicon Valley.

Japan Post said it would spend ¥150bn ($1.4bn) for an 8.3 per cent stake in Rakuten as the two groups seek to partner in logistics, mobile and payments businesses. The deal will also give Tencent, which owns China’s dominant messaging app WeChat, a 3.6 per cent stake and Walmart a 0.9 per cent holding in the Japanese internet group founded by Hiroshi Mikitani. 

“By combining the real and virtual, I’m excited to create a new partnership as we face the extremely powerful IT forces led by GAFA [Google, Amazon, Facebook and Apple],” Mikitani said at a news conference. 

Hiroto Furuhashi, managing executive officer at Rakuten, told the Financial Times the capital tie-up with Tencent would open up opportunities in online gaming and other entertainment content, as well as ecommerce. It would also provide Rakuten with a long-desired footprint in China, where it hopes to distribute Japanese content and intellectual property. 

The deal represents a rare injection of Chinese capital into one of Japan’s largest technology groups at a time when companies globally are carefully navigating geopolitical tensions between Washington and Beijing. 

“We have been very sensitive about which area we should be working closely and which area we shouldn’t,” Furuhashi said, adding that the two groups concluded there were no regulatory or compliance issues in the areas they were thinking of collaborating on. 

For Japan Post, the deeper ties with Rakuten marks its latest quest to find new sources of growth as its mainstay businesses continue to face long-term decline and high costs. It also adds to the company’s efforts to recover from the reputational hit from its disastrous acquisition of the Australian logistics company Toll.

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When Japan Post — which comprises a postal unit with a nationwide network of 24,300 post offices, the country’s largest bank by deposits and the largest insurer — was floated in 2015, it was sold to the public as an opportunity to buy a rock-solid set of businesses which also planned to innovate in areas of logistics and fintech. However, shares in the bank, insurance and holding company all remain substantially below their IPO prices.

The share issuance will bolster Rakuten’s balance sheet at a time when the company has made heavy investments to build its own mobile network to compete against bigger rivals NTT DoCoMo and SoftBank. In addition to Amazon, it also faces tougher competition at home after Z Holdings, a subsidiary of SoftBank’s telecoms arm that operates Yahoo Japan, completed its merger with messaging app Line earlier this month.

Shares in Rakuten, which will be sold for ¥1,145 a share, jumped 8.6 per cent to ¥1,245 on Friday, while Japan Post rose 4.9 per cent.