Walmart, Tencent, Japan Post acquire 13% of troubled Rakuten

Japanese e-commerce giant Rakuten sold on Monday 13 percent of its shares, worth $2.2 billion, to several new investors, as the company attempts to strengthen its balance sheet, while rolling out a more aggressive mobile strategy.

The new investors into Rakuten are Japan Post – the country’s largest insurer and bank by deposit, as well as owner of over 24,000 physical post offices – will take 8.32 percent of total shares in the company which amounts to $1.4 billion, to become its fourth largest investor.

In parallel, Rakuten also announced on the same day that Chinese media titan Tencent had also acquired 3.65 percent shares in the company – through its Hong Kong-based Image Frame Investment firm – amounting to $600 million. While U.S.’ Walmart will also assume 0.92 percent ownership of Rakuten, amounting to $150 million.

All three investments would bring the Japanese e-commerce company a total of $2.2 billion, which is equal to 12.89 percent of its total shares.

It is notable that the announcement comes shortly after the company reported late last month a record loss of $1.1 billion for the fiscal year of 2020; a number almost four times the loss recorded in the previous year.

The tech giant’s fall from financial grace was mainly due to both Rakuten Mobile’s shaky subscriber growth and crushing CAPEX needs; it later estimated that it would break even when reaching seven million subscribers, expected by 2023.

Regardless of the hurdles facing the company, it vowed an attempt to position itself competitively within the mobile market, as Rakuten Chairman and CEO, Hiroshi Mikitani, declaring that it had “no intention of staying in the number four position.”

The investments received by Japanese tech company will provide it with a war chest of benefits to fight its way back to the top; according to a joint statement, Rakuten will enter a business alliance with new shareholder Japan post to “to strengthen their collaborations across a range of fields, including logistics, mobile, digital transformation and more.”

This alliance will translate into the creation of shared logistics centers as well as delivery and pick-up systems and data sharing; in parallel, both companies will work toward digitizing their logistical platforms.

In parallel, on the mobile side, Rakuten will use its partner’s post offices to set up customer counters to accept new signup applications and to use Japan Post’s network to conduct marketing initiatives.

In return, Japan Post will capitalize on Rakuten’s digital transformation experts to bolster its digitization efforts, while exploring future collaborations in financial services and e-commerce.

“From the perspective of our Group strengths across a physical network of post offices nationwide and a robust logistics system, the cutting-edge digital technology and deep knowhow leveraged by the Rakuten Group in a diverse business portfolio of Internet services, position them as an ideal partner,” said Hiroya Masuda, President of Japan Post.

“This alliance will further strengthen the relationship between our two groups, and going forward, we very much look forward to driving the momentum of our collaborations not only in logistics, but also mobile, digital transformation and a wide range of fields,” he added.

On the media front, Rakuten will look to use its new ties with Tencent to increase “potential areas for collaboration including digital entertainment and e-commerce.”

Mikitani highlighted that the new potential for partnering with Tencent opens a broad portfolio of opportunities, from digital entertainment, including online games, to e-commerce with Rakuten.

“Rakuten has built a vibrant ecosystem through its membership and loyalty program, extending its unrivalled strength from e-commerce to FinTech and digital content. Tencent shares Rakuten’s aspiration of creating value through innovation and empowerment for users and partners,” Martin Lau, Executive Director and President, Tencent Holdings, said in a press statement.

Lau added that Tencent are excited to invest in Rakuten, supporting its evolution into a global innovation leader. “We look forward to pursuing strategic cooperation across activities including digital entertainment and e-commerce, creating value for users and building the Internet ecosystem together,” the Tencent president noted.

It is worth mentioning that Walmart’s involvement in the Rakuten deals comes just briefly following its sale of 85 percent of its shares in Japan’s largest supermarket chains Seiyu. Thus, proving that the American retailer is still committed to expand its presence within the country.

“Around the world, we’re making strategic equity investments to enable Walmart to benefit from future growth in a rapidly changing global retail environment,” said Judith McKenna, President and CEO of Walmart International, in a statement.