At a Board of Directors meeting held today, Rakuten, Inc. (hereinafter the “Company”) resolved to acquire Ebates Inc. (hereinafter “Ebates”), provider of the leading membership-based online cash-back site in the US. The Company will acquire Ebates for a total consideration of $1 billion in cash, and will hold 100% of Ebates outstanding voting stock.
１．Purpose of acquisition
Ebates, founded in 1999, is a pioneer and major provider of a membership-based online cash-back site and offers a robust platform that drives e-Commerce for retailers. Ebates has over 2,600 enterprises across a variety of retail formats and product genres in its network, including major e-Commerce sites, other retailers with significant e-Commerce operations, and online travel agencies. It also has 2.5 million loyal active members with increasing shopping activity per member. In FY2013, Ebates generated $2.2 billion of gross merchandise value (GMV), net revenue of $167.4 million, and operating income of $13.7 million.
Since the acquisition of LinkShare in 2005, Rakuten Group has successfully expanded businesses in e-Commerce, advertising and related areas through long-standing mutual respect with Ebates. It is a natural fit for the Company to acquire a key player like Ebates, in order to develop a unique and innovative e-Commerce platform, by integrating our existing business assets and technologies of the Rakuten Group with Ebates.
Since its foundation, the Company has developed a B2B2C online shopping mall together with our merchants under the concept of “Empowerment”. Our business is membership-based, and members are able to enjoy a range of services including e-Commerce, travel, digital content, and financial services, through common log-in IDs and the Rakuten Super Points program which forms the core of our “Rakuten Ecosystem”. With participation of Ebates, Rakuten Group aims to create the world’s largest product line-up ranging from niche to luxury products, and to allow consumers to enjoy points rewards and cash-back upon purchase of products over various partner sites through Ebates.
The Company believes in the affinity of a membership business between Ebates and Rakuten’s business model. The combination of the two companies will give birth to an attractive and innovative membership-based marketplace for consumers featuring a point program at the core. Through this acquisition, we aim to jump ahead with our global e-Commerce strategy and lead the global e-Commerce industry.
２．Overview of Ebates
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(1) |
Name |
Ebates Inc. |
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(2) |
Address |
160 Spear Street, Suite 1900, San Francisco, California 94105 United States |
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(3) |
Name and title of representative |
Kevin H. Johnson, CEO |
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(4) |
Nature of business |
e-Commerce related services |
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(5) |
Capital stock |
US$ 76,219 thousand as of December 31, 2013 |
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(6) |
Founded |
April 13, 1999 |
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(7) |
Major shareholders and their holdings |
August Capital: 27.3% |
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(8) |
Relations between Rakuten Group and Ebates |
Capital |
None |
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Personnel |
None |
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Business |
LinkShare Corporation, subsidiary of Rakuten, Inc. has a business relationship |
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(9) |
Ebates consolidated business results and financial position for past three years |
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Fiscal Year |
Year ended December 31, 2011 |
Year ended December 31, 2012 |
Year ended December 31, 2013 |
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Net assets |
17,971 |
66,400 |
76,890 |
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Total assets |
51,454 |
115,378 |
144,676 |
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Net assets per share |
0.69 |
2.21 |
2.37 |
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Revenues |
73,940 |
121,776 |
167,389 |
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Operating income |
9,133 |
13,678 |
13,668 |
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Net income |
5,069 |
8,223 |
7,815 |
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Net income per share |
0.19 |
0.27 |
0.24 |
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Dividends per share |
0.00 |
0.00 |
0.00 |
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３．Details of Company Whose Shares will be Acquired
The outline of the major existing shareholders from whom the company will acquire shares is listed below. Before the transaction, the aggregated total ownership of such shareholders is approximately 77%. The acquisition of the remaining ownership by the other existing shareholders including employees of Ebates is planned simultaneously.
(1) August Capital
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(1) |
Name |
August Capital III, L.P. August Capital V Special Opportunities, L.P. |
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(2) |
Address |
2480 Sand Hill Road Suite 101, Menlo Park, CA 94025, United States |
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(3) |
Form of legal establishment |
Limited Partnership formed in the State of Delaware, US |
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(4) |
Purpose of establishment |
Venture Capital mainly investing in high-tech industry |
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(5) |
Date of establishment |
January, 2000 / December, 2008 |
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(6) |
Aggregate capital |
Not disclosed due to confidentiality obligations |
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(7) |
Fund members, % of fund, description of members |
Not disclosed due to confidentiality obligations |
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(8) |
Description of operating entity |
Name |
August Capital Management III / V. L.L.C |
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Address |
California, United States |
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Name and title of representative |
Not disclosed due to confidentiality obligations |
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Business Description |
Venture capital investment or management |
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Stated capital |
Not disclosed due to confidentiality obligations |
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(9) |
Description of agent in Japan |
No agent in Japan |
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(10) |
Relations between Rakuten Group and the relevant fund |
Relations between Rakuten Group and the relevant fund |
There is no capital, personnel or business relationship between the Rakuten Group and the fund to be specified |
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Relations between Rakuten Group and the executive partner |
There is no capital, personnel or business relationship between the Rakuten Group and the executive partner to be specified |
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(2) Foundation Capital Management
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(1) |
Name |
Foundation Capital II, L.P. |
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(2) |
Address |
250 Middlefield Road, Menlo Park, CA 94025, United States |
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(3) |
Form of legal establishment |
Limited Partnership formed in the State of Delaware, US |
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(4) |
Purpose of establishment |
Venture Capital mainly investing in high-tech industry |
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(5) |
Date of establishment |
February,1998 / March, 1998 / June, 1998 |
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(6) |
Aggregate capital |
Not disclosed due to confidentiality obligations |
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(7) |
Fund members, % of fund, description of members |
Not disclosed due to confidentiality obligations |
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(8) |
Description of operating entity |
Name |
Foundation Capital Management Co. II, L.L.C. |
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Address |
California, United States |
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Name and title of representative |
Not disclosed due to confidentiality obligations |
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Business Description |
Venture capital investment or management |
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Stated capital |
Not disclosed due to confidentiality obligations |
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(9) |
Description of agent in Japan |
No agent in Japan |
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(10) |
Relations between Rakuten Group and the relevant fund |
Relations between Rakuten Group and the relevant fund |
There is no capital, personnel or business relationship between the Rakuten Group and the fund to be specified |
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Relations between Rakuten Group and the executive partner |
There is no capital, personnel or business relationship between the Rakuten Group and the executive partner to be specified |
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(3) Canaan Partners
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(1) |
Name |
Canaan Equity II L.P. |
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(2) |
Address |
2765 Sand Hill Road, Menlo Park, CA 94025, United States |
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(3) |
Form of legal establishment |
Limited Partnership formed in the State of Delaware, US |
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(4) |
Purpose of establishment |
Venture capital mainly investing in high-tech and healthcare industries |
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(5) |
Date of establishment |
October, 1999 / October, 1999 / October, 1999 / December, 2007 |
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(6) |
Aggregate capital |
Not disclosed due to confidentiality obligations |
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(7) |
Fund members, % of fund, description of members |
Not disclosed due to confidentiality obligations |
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(8) |
Description of operating entity |
Name |
Canaan Equity Partners II LLC (for Canaan Equity II L.P., Canaan Equity II L.P. (QP) and Canaan Equity II Entrepreneurs LLC) Canaan Partners VIII LLC (for Canaan VIII L.P.) |
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Address |
California, United States |
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Name and title of representative |
Not disclosed due to confidentiality obligations |
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Business Description |
Venture capital investment or management |
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Stated capital |
Not disclosed due to confidentiality obligations |
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(9) |
Description of agent in Japan |
No agent in Japan |
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(10) |
Relations between Rakuten Group and the relevant fund |
Relations between Rakuten Group and the relevant fund |
There is no capital, personnel or business relationship between the Rakuten Group and the fund to be specified |
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Relations between Rakuten Group and the executive partner |
There is no capital, personnel or business relationship between the Rakuten Group and the executive partner to be specified |
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4. Number of Shares to be Acquired, Acquisition Price and State of Share Ownership Before and After Acquisition
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(1) |
Number of shares held before transfer |
0 shares |
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(2) |
Number of shares to be acquired |
32,852 thousand shares (Acquired shares from existing shareholders, including stock options) (number of voting rights：32,852 thousand on fully-diluted basis) |
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(3) |
Acquisition price |
Total investment: approximately USD 1 billion (approximately JPY 105 billion) Approximately USD 10 million, including advisory expenses, compensation and other expenses, is additionally expected Note: the amounts in JPY are calculated by the currency rate on September 8, 2014 (approximately JPY105 per USD1) |
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(4) |
Number of shares held after transfer |
32,852 thousand shares (Acquired shares from existing shareholders, including stock options) (Number of voting rights：32,852 thousand on fully-diluted basis) Newly issued shares: Not decided (Voting rights holding ratio: 100.0%) |
The Company plans to utilize current cash on hand and one or more of the following to finance the acquisition; bank borrowings, commercial papers and bonds.
5. Schedule
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(1) |
Resolution Date of the Board of Directors’ meeting |
September 9, 2014 |
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(2) |
Contract Date |
September 9, 2014 |
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(3) |
Closing of Transaction |
October 2014 (plan) |
6. Future Outlook
The potential impact on our earnings from this acquisition is at present difficult to estimate. From hereon, the Company will make a disclosure, if necessary, in a timely and appropriate manner. In addition, valuation of goodwill and intangible assets, and the time period to depreciate these intangible assets will be decided after scrutiny of these assets.