Rakuten Buys Ebates For $1 Billion

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Rumors have been swirling around Japan’s Rakuten, which has been in discussions with rebate website operator Ebates.com, regarding a potential acquisition deal. That deal is now official, as the company announced today it has agreed to acquire Ebates for $1 billion. That’s roughly what Rakuten paid to acquire mobile messaging app Viber back in February.

Rakuten is paying $1 billion in cash for the company, and will retain 100 percent of Ebates’ outstanding voting stock, as the deal completes.

San Francisco-based Ebates offers a website that offers customers a way to earn cash back when shopping online at over 2,600 stores including Amazon.com, Macy’s, Best Buy, Home Depot and others. In 2013, 2.5 million members spent over $2.2 billion shopping through Ebates. With the acquisition, Japan’s largest e-commerce firm now has a new entry point into the U.S.’s growing e-commerce market, as well as a means to offer similar products, including online e-coupons, back home where they could complement Rakuten’s own online shopping loyalty program, Rakuten Super Points.

“The combination of Rakuten and Ebates is entirely unique and will revolutionize e-commerce,” said Rakuten, Inc. founder and CEO Hiroshi Mikitani. “This is all about the consumer and we are excited to be able to empower our members with even more ways to enjoy shopping on Rakuten and Ebates. Combined, Rakuten and Ebates will be able to offer our members access to what will undoubtedly be the world’s largest selection of products across the broadest range of categories. It will also give our members the greatest incentives to keep shopping.”

But the stock market did not react favorably when news of the talks first leaked out earlier this week, which led Rakuten to confirm that discussions were taking place, via a company statement on Saturday. Shares fell by 4.2 percent, closing at 1,270 yen, Bloomberg reported – the biggest loss in three months’ time.

Analysts have questioned the cost-effectiveness of the deal, wondering when these large-scale acquisitions would actually turn a profit for the e-commerce giant. Of particular concern is how large a presence Amazon.com holds in the U.S. market, where Rakuten now wants to compete more directly.

With Ebates, Rakuten says it believes that the combination of the two companies will “help create the world’s most attractive and innovative membership-based, loyalty-driven marketplace for consumers.”

Since 2005, Rakuten has been working to expand beyond Japan through M&A activity, in order to play on a global stage by offering services that include online shopping, online video, travel, banking, financing, and more. It has acquired a number of companies to date to help it with its expansion plans, including Buy.com (for $250 million in 2010) and Kobo ($250 million in 2012), for example, and, most recently, mobile shopping companion Slice. It also holds stakes in Pinterest and other companies.

Ebates, which also runs dedicated sites for customers in South Korea, China, Russia and Canada, will continue to operate from San Francisco following the deal’s closure, which is expected in about a month’s time.