Continuing its recent shopping spree, Japanese Internet powerhouse Rakuten, will increase its user base to half a billion with the purchase of Israeli owned Viber.
E-commerce giant Rakuten Inc., controlled by billionaire Hiroshi Mikitani, will buy call and messaging app provider Viber Media Inc. for $900 m in a deal that would more than double the number of users in its expanding digital empire.
Rakuten offers services from financing to shopping to online video on its e-commerce platform, the largest in Japan.
Privately held Viber, run from Cyprus by Israeli entrepreneur Talmon Marco, will add 300 million users to Rakuten's existing 200 million users, Mikitani told reporters in Tokyo.
"This acquisition... will take Rakuten to a different level," said Mikitani, who is also the company's chief executive. The cash deal was announced after Rakuten reported an 80 percent jump in its 2013 operating profit.
"Developing this messaging system on our own would have been impossible," he added, saying Rakuten users could, for example, use Viber's instant messaging to contact an online store while considering a purchase.
Viber is one of the top five most downloaded smartphone phone call and messaging apps, and includes the United States, Russia and Australia amongst its biggest markets.
Chief Executive Marco stated Rakuten's acquisition would help his company become a platform for digital content, not just a provider of free voice calls and messages.
A plethora of messaging apps, including the likes of Viber, are seeking to capitalise on the appeal of their free services, especially in emerging markets.
Viber is funded from the pockets of its founders and several private investors from the United States. It competes with instant messaging apps such as WeChat, a unit of Chinese Internet firm Tencent Holdings Ltd, U.S. rival WhatsApp, and Line, owned by Korean company Naver Corp .
Viber recently launched an instant messaging app for personal computers that allows users to make outgoing mobile calls to other Viber users and non-registered mobile phones, making it a rival to Skype.
The acquisition by Rakuten is expected to be completed by the end of March according to both companies.
Rakuten's e-commerce platform, Rakuten Ichiba, is the sixth largest in the world by sales.The company puts a premium on its ability to communicate with customers. Last year, Mikitani told Reuters this personal touch will give Rakuten the edge over rivals like eBay Inc and Amazon.com Inc in Europe, where retailers are struggling to tempt clients to spend due to a recession.
Rakuten has spent big in recent years on a variety of overseas purchases to broaden its businesses and reach under what Mikitani calls its "Rakuten Ecosystem" strategy.
The company has acquired e-commerce providers from Brazil to Germany, as well as Toronto-based eReader business Kobo and online video providers Wuaki.tv of Spain and Viki of Singapore. In 2012, it made a large investment in website Pinterest.
Strong profit growth has contributed to its spending firepower.
In the 12 months ended Dec. 31, Rakuten's operating profit jumped 80 percent to 90.2 billion yen ($882.89 million), marking a sixth consecutive year of record earnings, though lagging the average 99.9 billion yen projected by 18 analysts polled by Thomson Reuters Starmine.
Net profit doubled to 43.5 billion yen, while revenue rose 30 percent to 518.6 billion yen.