By Makiko Yamazaki and Miho Uranaka
TOKYO (Reuters) -Japan’s Mizuho Financial Group will purchase shares worth $575 million in Rakuten Group’s securities unit – a major boost for the e-commerce giant’s battered finances, particularly as the unit’s IPO has been delayed.
The 87 billion yen investment, to be made through Mizuho’s securities unit, will lift the banking group’s stake in Rakuten Securities to 49% from just under 20%, Rakuten said on Thursday.
Rakuten also said it has temporarily withdrawn its application to have Rakuten Securities go public.
The postponement comes after the unit was forced to match its bigger rival SBI Securities in offering clients stock trading with zero commissions.
A successful IPO had been Rakuten Group’s initial plan for a much needed shot in the arm to counter troubles at its mobile network unit which has been haemorrhaging cash and struggling to take market share from established players.
But trading commissions account for the bulk of the securities unit’s revenue and Rakuten found during the IPO roadshow that it was unlikely to get its desired valuation, a source with knowledge of the matter said.
The source declined to be identified as the discussions were private.
The quick sale of a stake in its securities unit appears to indicate that Rakuten “needs money fast,” said Amir Anvarzadeh, strategist at Asymmetric Advisors.
“It has 800 billion yen of bonds maturing…It really looks dire,” he said, adding that Rakuten might also decide to list its credit card unit.
Rakuten Group has some 1.79 trillion yen in debt outstanding, with 769 billion yen of that coming due in the next two years, LSEG data shows.
“We have various forms of support from banks and there will be no problem in us redeeming bonds.
On top of that, we are working on improving cashflow throughout the Rakuten ecosystem,” Chief Executive Hiroshi Mikitani told a news conference
Rakuten reported a third-quarter loss of 54.5 billion yen ($360 million) on Thursday, compared with an operating loss of 94.2 billion yen in the same period last year.
Analysts had been expecting a loss of 35.98 billion yen, according to the average of seven estimates in a poll by LSEG.
For Mizuho, the partnership will help it tap Rakuten Securities’ online brokerage expertise as well as its relatively young clientele at a time of stiff competition for traditional face-to-face brokerage services.
Shares in Mizuho finished 1.9% higher while Rakuten shares ended up 0.4%.
($1 = 151.0200 yen)
(Reporting by Makiko Yamazaki and Miho Uranaka; Additional reporting by Anton Bridge in Tokyo and John Biju in Bengaluru; Editing by David Dolan and Edwina Gibbs)
