Notice Concerning Execution of a Memorandum of Understanding Regarding Reorganization of Rakuten’s FinTech Business

　Rakuten Group, Inc. (Head Office: Setagaya-ku, Tokyo; Chairman and CEO: Hiroshi Mikitani; hereinafter the “Rakuten Group”) and Rakuten Bank, Ltd. (Head office: Minato-ku, Tokyo; President and CEO: Hiroyuki Nagai; hereinafter the “Rakuten Bank”) hereby announce that we have agreed to initiate discussions aimed at the reorganization of Rakuten Group’s FinTech Business (Hereinafter the “FinTech Business”), including Rakuten Bank (Hereinafter the “Reorganization”), and, effective April 1, 2024, have executed a Memorandum of Understanding (Hereinafter the “MOU”) regarding the Reorganization.  

1. Background and Purpose of the Reorganization
　As the mission of Rakuten Group continues to be “empowerment of people and society through innovation,” both in Japan and overseas, through more than 70 services in a wide range of businesses including internet services such as e-commerce, travel, and digital content; FinTech (Financial) services such as credit cards, banking, securities, insurance, electronic money, and payment through mobile apps; mobile services such as the mobile carrier business; and professional sports, by organically linking these services based on a membership system centered around Rakuten members, we have formed the unique “Rakuten Ecosystem.” By creating an environment where members in Japan and overseas can easily browse and access multiple services, we aim to leverage group synergies to maximize the lifetime value of each member and minimize customer acquisition costs, thereby maximizing group profit.
　Each of our FinTech services continues to grow their membership base as more customers choose them to meet their everyday needs. Each FinTech service has been working to better collaborate to grow further in a cashless world. Meanwhile, the customer needs for financial services are becoming increasingly diverse, demanding more seamless and flexible service operations.
　In this context, Rakuten Group has been continuously considering its future strategies, optimal allocation of resources, and optimization of the group structure. As a result, given the aforementioned changes in the business environment, it has been deemed appropriate to initiate discussion on the Reorganization. This decision is based on the belief that enhancing the collaboration across FinTech Business, including prompt and flexible decision-making, along with the deepening of the collaboration including data integration and AI utilization, is crucial for providing innovative financial services and adding more value to customers. The Reorganization is expected to further expand the FinTech Business ecosystem and improve its competitive advantage, which in turn, is believed to accelerate the growth of the entire Rakuten Ecosystem and contribute to the enhancement of Rakuten Group’s enterprise value. Rakuten Group will continue to consider the optimal group structure and capital structure while considering its financial soundness.
　On the other hand, Rakuten Bank has been working to further expand the customer base, strengthen the revenue base, and capture growth in the FinTech domain, aiming to become a leading fintech company in the age of zero cash. Rakuten Bank is working towards realization of this business expansion, by efficiently acquiring new customers from Rakuten members who utilize the Rakuten Ecosystem, and collaborating with various Rakuten group companies. By offering banking services that address the financial transaction needs and funding demands existing within the Rakuten Ecosystem, it aims to increase its customer base and transaction opportunities, thereby further accelerating its business expansion. In our business for individual customers, we aim to become (1) “a bank as a main account” and (2) “safe, secure, and convenient bank” that leverages technologies and can be used anytime and anywhere. In our business for corporate customers, we will make use of technologies to provide one-stop banking services, including loans, currency exchange, and deposits tailored to the needs of our customers, with the aim of becoming (1) “a bank that provides convenience to all customers regardless of company size” and (2) “a banking partner to corporate managers”.
　In this context, Rakuten Bank has decided to proceed with further examination and discussions on the Reorganization, considering it to be an opportunity to achieve deeper collaboration with other companies in the FinTech Business. In our business for individual customers, the Reorganization aims to provide comprehensive financial services tailored to the lifecycle and life stages of customers, and, in our business for corporate customers, to promote and accelerate the penetration of Rakuten Bank’s corporate services to the corporate customer base of the FinTech Business.
　Both Rakuten Group and Rakuten Bank will continue to discuss and evaluate the Reorganization from the perspective of whether this will contribute to further sustainable growth and enhance the enterprise value of both Rakuten Group and Rakuten Bank.

2. Structure of the Reorganization
　We are considering integrating the entire FinTech businesses[1] including Rakuten Bank, Rakuten Card Co., Ltd., Rakuten Securities Holdings Co., Ltd. (hereinafter “Rakuten Securities HD”), Rakuten Insurance Holdings Co., Ltd., and other FinTech businesses into one group.
　Even after the Reorganization, Rakuten Bank will continue to be an important consolidated subsidiary of Rakuten Group and the FinTech Business will continue to be the core business segment in the entire Rakuten group.
　On November 9, 2023, we have notified that Rakuten Securities HD continues to maintain its policy to list in “Notice of Withdrawal of Application for Listing of Shares of Rakuten Securities Holdings, Inc. on the Tokyo Stock Exchange”. However, should the Reorganization be implemented as a result of the discussions going forward, we are planning to discuss with Rakuten Securities HD the possibility of not pursuing its initial public offering.
　The above reflects our current considerations, contingent upon future discussions, as well as the regulatory approvals and licenses from supervisory authorities. There is a possibility that further reorganization of Rakuten Group may be necessary or that it may be concluded not to implement all or part of the Reorganization.

[1] Assuming Rakuten Wallet, Inc. to be out of the scope

3. Matters regarding the Listing of Shares after the Reorganization
　As of today, Rakuten Bank’s shares are listed on the Tokyo Stock Exchange Prime Market. We anticipate that the Rakuten Bank’s shares will be listed continuously on the Tokyo Stock Exchange Prime Market even after the completion of the Reorganization.

4. Measures to Ensure Fairness
　Since Rakuten Group owns 85,962,580 shares of Rakuten Bank (shareholding ratio: 49.27%) and is a parent company of Rakuten Bank, the Reorganization falls under the category of a material transaction with the controlling shareholder for Rakuten Bank. Consequently, Rakuten Bank implemented measures to ensure the fairness in the Reorganization.
　First, the Board of Directors of Rakuten Bank established an independent Special Committee (hereinafter the “Special Committee”) which consists of a total of six members: all independent outside directors of Rakuten Bank (Mr. Eiji Ebinuma, Mr. Michio Kayano, Mr. Masatsugu Nagato), and all independent outside audit and supervisory board members (Mr. Shinnosuke Yamada, Mr. Tadamichi Shibano, Mr. Toru Mimura), who are independent from Rakuten Group and have no interests in whether the Reorganization will be implemented. The Board of Directors of Rakuten Bank referred the following mandates (hereinafter “the Consulted Matters”) to the Special Committee: 1) to consider whether the Board of Directors of Rakuten Bank should decide to implement the Reorganization and to make recommendations to the Board of Directors of Rakuten Bank on that matter; and 2) to examine whether the decision by the Board of Directors of Rakuten Bank to implement the Reorganization would not be disadvantageous to the minority shareholders of Rakuten Bank and to provide their opinions to the Board of Directors of Rakuten Bank.
　For discussing the Reorganization, Rakuten Bank has established an internal team which is independent from Rakuten Group, and has retained independent advisors (Daiwa Securities Co., Ltd. as financial advisor and Mori Hamada & Matsumoto as legal advisor), with the approval from the Special Committee. Also, the Special Committee has retained Deloitte Tohmatsu Financial Advisory LLC as independent third-party valuation institution to evaluate the terms and conditions of the Reorganization.
　In addition, before the execution of the MOU, the Board of Directors of Rakuten Bank has obtained the opinion (hereinafter the “Opinion”) from the Special Committee stating that the Reorganization could be a meaningful measure from the perspective of enhancing Rakuten Bank’s enterprise value, and the execution of the MOU and its announcement are deemed useful in advancing the thorough examination of the Reorganization, which requires the involvement of numerous stakeholders. Furthermore, the MOU does not impose any legal obligation on Rakuten Bank to execute the Reorganization. Therefore, the decision for the Board of Directors of Rakuten Bank to execute the MOU to initiate discussions on the Reorganization is not considered in particular unreasonable for Rakuten Bank and is not disadvantageous to the minority shareholders of Rakuten Bank. Considering the content of the Opinion, the Board of Directors of Rakuten Bank has decided to execute the MOU. As discussions will continue going forward, the Board of Directors of Rakuten Bank intends to respect the Special Committee’s opinion to the utmost in any decision-making related to the Reorganization, and plans to obtain a written report regarding the Consulted Matters from the Special Committee stating that the Reorganization is not disadvantageous to the minority shareholders of Rakuten Bank before executing the definitive agreement related to the Reorganization. In case the Special Committee determines that any of the purpose, terms and conditions, or the process of the Reorganization is not appropriate, the Board of Directors of Rakuten Bank will decide not to proceed with the Reorganization.

5. Measures to Avoid Conflicts of Interest
　Since Rakuten Group owns 85,962,580 shares of Rakuten Bank (shareholding ratio: 49.27%) and is a parent company of Rakuten Bank, the Reorganization falls under the category of a material transaction with the controlling shareholder for Rakuten Bank. Consequently, Rakuten Bank established an independent Special Committee, as described in section 4, to avoid conflicts of interest between Rakuten Group and Rakuten Bank.
　In addition, before the execution of the MOU, the Board of Directors of Rakuten Bank has obtained the Opinion from the Special Committee. Considering the content of the Opinion, the Board of Directors of Rakuten Bank has decided to execute the MOU. As discussions will continue going forward, the Board of Directors of Rakuten Bank intends to respect the Special Committee’s opinion to the utmost in any decision-making related to the Reorganization, and plans to obtain a written report regarding the Consulted Matters from the Special Committee before executing the definitive agreement related to the Reorganization. In case the Special Committee determines that any of the purpose, terms and conditions, or the process of the Reorganization is not appropriate, the Board of Directors of Rakuten Bank will decide not to proceed with the Reorganization.
　Hiroshi Mikitani, who is currently the Chairman and CEO of the Rakuten Group, and the Board of Director of Rakuten Bank, did not participate in the deliberations and resolutions of the Board of Directors of Rakuten Bank relating to the Reorganization. Hiroshi Mikitani will not participate in the deliberations and resolutions of the Board of Directors of Rakuten Bank regarding the Reorganization going forward as well.

6. Process of the Reorganization
　Rakuten Group and Rakuten Bank will proceed with discussions towards entering into a definitive agreement related to the Reorganization, and obtain approval at the Rakuten Bank’s shareholders’ meeting (if necessary) and obtain the necessary approvals and licenses from regulatory authorities with the goal of promptly implementing the effects of the Reorganization. The Reorganization is expected to take effect in October 2024. However, the above schedule is subject to change depending on the results of future discussions, including those involving approvals and licenses from regulatory authorities.

7. Overview of the Companies (As of December 31, 2023)

* Since Rakuten Securities Holdings, Inc. is a holding company, showing the financials of the operating subsidiaries related to the Reorganization.

8. Future Outlook
　As described in section 6, Rakuten Group and Rakuten Bank will proceed with discussions towards entering into a definitive agreement related to the Reorganization, and obtain approval at the Rakuten Bank’s shareholders’ meeting (if necessary) and obtain the necessary approvals and licenses from regulatory authorities with the goal of promptly implementing the effects of the Reorganization. The Reorganization is expected to take effect in October 2024. However, the above schedule is subject to change depending on the results of future discussions, including those involving approvals and licenses from regulatory authorities. We will promptly announce any matters that require disclosure.

9. Transactions etc. with Controlling Shareholder

(1) Applicability of transactions, etc. with the controlling shareholder and compliance with the policy on measures to protect minority shareholders
　Since Rakuten Group owns 85,962,580 shares of Rakuten Bank (shareholding ratio: 49.27%) and is a parent company of Rakuten Bank, the Reorganization falls under the category of a material transaction with the controlling shareholder for Rakuten Bank.
　In the “Guidelines Concerning Measures to Protect Minority Shareholders in Transactions with Controlling Shareholders”, which is disclosed in Rakuten Bank’s Corporate Governance Report on November 7, 2023, Rakuten Bank established a “Special Advisory Committee” comprising of independent officers, and Rakuten Bank stipulates the requirement to seek consultation or post-factum reporting of the Special Advisory Committee for any transactions with Rakuten Group.
　As described in section 4 and section 5, Rakuten Bank has established the Special Committee, which is the same members as the Special Supervisory Committee, as a measure to avoid conflicts of interest between Rakuten Group and Rakuten Bank and to ensure the fairness of the Reorganization. We believe that such measures are in compliance with the aforementioned policy. 

(2) Measures to ensure fairness and avoid conflicts of interest
　As described in section 4 and section 5, Rakuten Bank has implemented measures to avoid conflicts of interest between Rakuten Group and Rakuten Bank and to ensure the fairness of the Reorganization.

(3) Overview of the opinions obtained from parties with no interests in the controlling shareholder regarding the matter that the relevant transactions, etc. are not disadvantageous to the minority shareholders
　The Board of Directors of Rakuten Bank has established the Special Committee as a measure to avoid conflicts of interest between Rakuten Group and Rakuten Bank and to ensure the fairness of the Reorganization and has obtained the Opinion from the Special Committee for the execution of the MOU. In addition, the Board of Directors of Rakuten Bank intends to respect the Special Committee’s opinion to the utmost in any decision-making related to the Reorganization, and plans to obtain a written report regarding the Consulted Matters from the Special Committee before executing the definitive agreement related to the Reorganization. For details, please see section 4 and section 5 above.