Rakuten to buy OverDrive for £275m

Rakuten to buy OverDrive for £275m

Japanese e-commerce company Rakuten is to buy OverDrive, which provides an e-book library lending platform, for $410m (£275m) in cash.

The move will help Rakuten to expand into "new market segments".

OverDrive is a distribution platform which supplies e-books, audiobooks, music and streaming video to 30,000 libraries, schools and retailers across the world.

Rakuten Inc will fully acquire OverDrive Holdings, Inc, in a deal that is expected to close in April this year.

Takahito Aiki, head of Rakuten’s global e-book business, said: “OverDrive is a widely-respected pioneer in digital content and the sharing economy. Long before even Kobo emerged onto the global stage, OverDrive had already seen the future and was working with publishers to digitise their content to share with the world, building one of the most comprehensive online digital marketplaces in the process.

“OverDrive’s deep content library and relationships with publishers, libraries, schools, and retailers will allow Rakuten to extend our mission of empowerment to new market segments and accelerate the growth of our digital contents businesses.”

OverDrive founder and c.e.o. Steve Potash said: “Rakuten’s vision of empowerment is perfectly aligned with OverDrive. Since 1986, our vision has been to advance digital publishing and content to connect readers with books and information. We’re passionate about working with publishers, libraries, schools and retailers to make that happen, and we are very excited to join an innovative company that shares and supports our vision.”

The acquisition of OverDrive will add a digital distribution platform to Rakuten's businesses, with more than 2.5m titles, and relationships with 5,000 publishers and 30,000 libraries "that will strengthen Rakuten’s e-book and digital contents businesses globally".

Rakuten said that with the addition of OverDrive it expected its EBITDA (earnings before interest, taxes, depreciation and amotisation) to break even in 2015.

The purchase of Kobo was phase one of Rakuten's plan for e-books, enabling it to enter the e-book selling market with a device and an app. The purchase of OverDrive is phase two, giving Rakuten access to the e-book borrowing and sharing market with libraries and institutions, said a presentation by the company.

In addition to Kobo, Rakuten also has a video streaming service and a global TV and video site. The purchase of OverDrive will help expand the company's "global internet services ecosystem", it said, which is part of its digital content strategy. The company's other two strategic pillars are e-commerce and finance. 

Rakuten has undergone a number of changes in the past few years. It bought Kobo Books for $315m in 2011, and in October 2014 Rakuten launched a new UK website selling physical books and audiobooks via third-party sellers.

Aiki became c.e.o. of Kobo in February 2014, after Mike Serbinis stepped down.

Rakuten is headquartered in Tokyo, while OverDrive is based in Ohio, US.