RAKUTEN Group Inc. has chosen Goldman Sachs Group Inc. and Daiwa Securities Group Inc. As lead managers of its banking unit’s initial public offering, people familiar with the matter said, the online retailer chases fintech growth to counter mounting losses.
People familiar with the matter said Rakuten was preparing to list its banking unit with a valuation of between 300 billion yen ($2.1 billion) and 400 billion yen in an initial public offering in early December, and asked not to be named because the matter is confidential. They said deliberations are ongoing and details of Rakuten Bank Ltd.’s offering, including the bank’s manager line-up and size, could still change.
A spokesperson for Rakuten declined to comment, as did representatives at Goldman and Daiwa.
The bank’s planned listing on the Tokyo Stock Exchange is part of a push by Rakuten to expand into financial services. Intense competition from Amazon.com Inc. The Japanese company’s core e-commerce revenue, while aggressive promotions for its mobile unit are weighing on the company with losses.
Rakuten’s fintech sector is increasingly driving growth at a company that is still largely well-established in Japan, despite its ambitions to expand abroad. The company’s credit cards, banking, securities and insurance together accounted for its largest operating income in the April-June quarter. Rakuten is separately preparing to list its stock unit.
“It makes sense for Rakuten to raise funds to help the banking unit grow even more – the combination of e-commerce operations and financial technology makes the company a strong and attractive player in Japan,” said Kazunori Ito, analyst at Morningstar.
Hiroshi Mikitani, CEO and founder of the company, had made a big bet on wireless services by building a fourth mobile network in a saturated market controlled by NTT Docomo Inc. and KDDI Corp and the wireless unit SoftBank Group Corp. The costly bet led to continued losses in the company, which had been for many years against Amazon.
Rakuten’s quarterly operating losses widened a year ago, prompting S&P Global Ratings to describe the company with a negative credit outlook. Standard & Poor’s said the Japanese company’s non-financial unit is expected to be “extremely negative” of free operating cash flow in the next 12 to 18 months, as improvement in the mobile business will be delayed.
Ito said the mobile unit’s losses are caused by “miscalculations that cannot be reversed, and more liquidity will be needed in the long run.”