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Kobo sold to Rakuten
09.11.11 | Katie Allen and Philip Jones
Japanese e-commerce firm Rakuten has acquired the fast-growing e-reading service Kobo for $315m.
The move follows Rakuten’s acquisition of internet retailer Play.com earlier this year for £25m in cash, as part of the company’s European expansion plan. In October, Kobo partnered with the UK’s W H Smith to launch an e-reader, and teamed up with French retail chain Fnac. Rakuten said it planned to use Kobo to push into the expanding e-reading market.
Indigo Books & Music, the founder and majority shareholder in Kobo, said Rakuten had agreed to acquire all of the outstanding shares of Kobo Inc for $315m. Indigo expects to receive approximately $140m-$150m from the sale.
Kobo will continue to be headed by c.e.o. Michael Serbinis, and will remain as a stand-alone operation based in Toronto. Serbinis said: "Kobo will continue its aggressive growth trajectory with Rakuten's support . . . We look forward to continuing to innovate, provide the best e-reading experience for customers, and expand internationally to solidify Kobo's leadership position in the global e-reading market."
Heather Reisman, c.e.o. of Indigo and chair of Kobo, said: "We are truly proud of the success that Kobo and Indigo have achieved. From start up, only 24 months ago, to becoming a strong global player with a unique reading experience and one of the largest multi-language eReading catalogues in the world, Kobo is now among the world leaders in the emerging eReading industry. Rakuten will allow Kobo to meet the demands of competing with the very best players in the world."
Kobo's sales were C$40.9m in the 13 weeks to 1st October, leading to a loss of $10.8m, compared with sales of C$13m and a loss of C$6.8m. In the half-year to 1st October 2011, Kobo had sales of C€58m leading to a loss of C$23.4m.
Rakuten was founded in 1997, is headquartered in Tokyo, with over 10,000 employees worldwide. Rakuten's sales have grown from 203m Yen in 2006 to 346m Yen last year. It said it planned to sell Kobo eReaders through Rakuten group companies worldwide, including Japan. Hiroshi Mikitani, chairman and c.e.o. of Rakuten, said: "Rakuten offers Kobo unparalleled opportunities to extend its reach through some of the world’s largest regional e-commerce companies, including Buy.com in the US, Tradoria in Germany, Rakuten Brazil, Rakuten Taiwan, Lekutian in China, TARAD in Thailand, and Rakuten Belanja Online in Indonesia, and of course, Rakuten Ichiba in Japan."
Heather Reisman, chief executive of Indigo and chair of Kobo, said Indigo would continue to partner with Kobo as the e-reading market grows in Canada. She said: "We are truly proud of the success that Kobo and Indigo have achieved. From start up, only 24 months ago, to becoming a strong global player with a unique reading experience and one of the largest multi-language eReading catalogues in the world, Kobo is now among the world leaders in the emerging eReading industry. Rakuten will allow Kobo to meet the demands of competing with the very best players in the world. Notwithstanding the sale, Indigo will maintain a very strong relationship with Kobo, supporting the products and the services both in store and online and directly benefiting from the growth of the Canadian eReading market."
Separately, Indigo reported its second-quarter results, showing store sales stalling and losses mounting. Revenue for the quarter was C$218.5m, up C$3.7m, but this was driven by sales growth at Kobo and the growth in sales at Indigo's online store. On a comparable store basis, Indigo and Chapters superstores posted a 4.3% decrease in revenue, while Coles and IndigoSpirit small format stores were down 2.9%. Indigo made a loss of C$30m - with the Kobo loss included this amounted to a total loss of C$40m. Reisman noted: "The results were expected as we continued to invest heavily in our rapidly growing global digital business and our transformation strategy to become the world’s first cultural department store."
The Kobo transaction is subject to customary closing conditions, including approval under the Investment Canada Act, and is expected to close in early 2012.