TOKYO (Reuters) - Japanese e-commerce firm Rakuten Inc (4755.T) said on Tuesday it would buy U.S. Internet discounter Ebates Inc for $1 billion, extending an acquisition spree in a deal whose logic has been questioned by analysts and investors alike.
The move underlines Rakuten's ambitions to grow overseas after recent international purchases worth over $1.2 billion. But shares in Japan's biggest e-commerce firm have fallen 5.4 percent since it said over the weekend it was considering the deal amid doubts about how it beds in another big acquisition.
Hiroshi Mikitani, Rakuten's billionaire chief executive, said on Tuesday the purchase was an opportunity for his company to get access to Ebates' U.S. customers. The San Francisco-based firm operates websites handling rebates and coupons issued by retailers like Amazon.com Inc (AMZN.O) and Best Buy Co Inc (BBY.N).
The deal is in line with Mikitani's plans to reduce Rakuten's reliance on the domestic market. Japan accounts for around 90 percent of revenues, but growth prospects are constrained by a shrinking population and weak consumer spending.
"This acquisition is Rakuten's first step into the U.S. market with an open form shopping site," Mikitani said at a news conference. "I hope through this acquisition we can take steps to change the internet shopping industry."
But observers like Hiroyuki Fukunaga, CEO of investment advisors Investrust, have questioned the value of the Ebates acquisition. "Investors will wonder whether this deal would be cost-effective when in the U.S. there's already a giant like Amazon," Fukunaga said.
High-profile acquisitions in recent years have included free messaging application Viber for $900 million, and Canadian e-book reader Kobo for $315 million. Mikitani is trying to transform Rakuten from a pure e-commerce firm into a one-stop-site for a global audience, along the lines of Amazon.
Rakuten already offers online services such as financing, travel, shopping and online video. It also recently announced it would set up a Japanese low-cost carrier with Malaysian budget carrier Air Asia.
"Mikitani keeps doing bolt-on acquisitions," said a person with direct knowledge of Rakuten's acquisitions. "He doesn't necessarily have a big plan on what he wants to do with all of the deals. Some of his recent deals are with smaller second-tier players, not top companies."
Rakuten filed a shelf registration to issue up to 100 billion yen ($940 million) in bonds to cover the acquisition, which is expects to close next month. It plans to use the proceeds for operating cash, capital spending and other purposes.
Analysts have said Rakuten's balance sheet is sufficiently strong that the latest purchase should not be a problem for the company, which also has ready access to bank financing.
As of end-June, Rakuten had 412.4 billion yen in cash against debts 390 billion yen. It used bank loans for the Viber purchase and cash for its $315 million purchase in 2010 of Canadian e-book reader Kobo.
Editing by William Mallard and Kenneth Maxwell