Rakuten Inc. acquires Viber in a 900-million-dollar deal, loses $2 billion in market value

Rakuten Inc., a Japanese online retailer, sharply dropped in Tokyo trading after making an official announcement that it has made a decision to acquire the Viber Internet messaging and calling services in a 900-million-dollar deal.

The companys shares dropped 9.5%, which is their most serious decline in more than four months.

In his attempt to increase the companys sales after missing analysts estimates for two years, its owner, billionaire Hiroshi Mikitani, has purchased stakes in social-network operator Pinterest Inc. and digital book seller Kobo Inc.

One of the analysts, who work for SMBC Nikko Securities Inc. – Kuni Kanamori revealed in a note cited by Bloomberg that investors patience may be tested by the levels of the companys overseas operations and new businesses losses.

Kanamori wrote: “The deal is large and comes despite the absence of contraction in Kobo operating losses. As we had hoped to see shrinking losses on M&A projects overseas, the deal leaves a negative impression.”

After buying Viber, Rakuten Inc. is considered to become one of the main rivals of Naver Corp. and its Line services, and Tencent Holding Ltd.s WeChat, both of which combine instant messaging with shopping and gaming. Rakuten will also compete with Microsoft Corp.s Skype service. Last week, Rakuten Inc. made a statement, revealing that the net loss of Viber last year was estimated to 29.5 million dollars.

One of the analysts working for CLSA – Mr. Oliver Matthew, wrote in a note cited by Bloomberg: “So far Viber has not done well in monetization, so that is the task for Rakuten. We understand the strategic role to help merchants communicate with consumers through mobiles, but are not sure Rakuten needed to buy Viber for that.” As reported by Bloomberg, he also degraded the stock to underperform from buy, and said “direct monetization of the Viber business is likely to take a long time.”

The owner of Rakuten Inc. Mr. Mikitani revealed at a briefing that Viber will probide a distribution channel for the digital products of the company. A game platform on Viber, whose instant messaging and free Internet phone services have more than 300 million users, is also planned to be created. According to Mikitani, the purchase, which will be financed through bank borrowing will be finalized in March 2014.

Rakuten Inc.s shares fell by 9.54% in Tokyo, the most in four months, to close the session at JPY1 499, wiping more than $2 billion in market value.