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Rakuten buys Kobo for $315m to grow downloadable media ecosystem

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I’ve been giving Kobo a lot of thought recently. In the UK, they’ve recently embarked upon a seriously large advertising campaign, highlighting their all new readers and taking the fight to Amazon with a rather compelling WH Smiths distribution deal. And they’ve only recently announced some new hardware that looks particularly neat.

What’s next for Kobo, though? That’s what I was ruminating upon — then this news popped into my inbox.

I have to say I wouldn’t have named Rakuten as an automatic buyer for Kobo. I haven’t had much cause to come across them up until now. The company is reportedly one of the world’s top 3 e-commerce companies by revenue (according to the press release and is quoted on the Japanese Stock Exchange. Aaaand they’re big. 10,000 employees worldwide style big.

Here’s the release:

Rakuten, Inc. (JASDAQ: 4755) and Kobo Inc. today announced that they have entered into a definitive agreement under which Rakuten intends to acquire 100% of total issued and outstanding shares of Kobo for US$315 million in cash.

Kobo was founded by and spun out of Indigo, the largest book, gift and specialty toy retailer in Canada, in December, 2009. Since that time, Kobo has become a fierce competitor in the eBook marketplace, with a family of innovative eReaders, a wide range of eReading apps, one of the largest eBook catalogues, an innovative social platform and retail partners around the globe.

The acquisition marks a major step forward for Rakuten, one of the world’s top 3 e-commerce companies by revenue, as it continues to expand its unique B2B2C borderless e-commerce business globally, by adding an ecosystem to provide downloadable media products to consumers, starting with eBooks.

Hiroshi Mikitani, Chairman and CEO of Rakuten, commented on the acquisition, “We are very excited about this next step. Kobo provides one of the world’s most communal eBook reading experiences with its innovative integration of social media, such as Facebook and Twitter; while Rakuten offers Kobo unparalleled opportunities to extend its reach through some of the world’s largest regional e-commerce companies, including in the US, Tradoria in Germany, Rakuten Brazil, Rakuten Taiwan, Lekutian in China, TARAD in Thailand, and Rakuten Belanja Online in Indonesia, and of course, Rakuten Ichiba in Japan.”

“From a business and cultural perspective this is a perfect match,” commented Kobo CEO Michael Serbinis. “We share a common vision of creating a content experience that is both global and social. Rakuten is already one of the world’s largest e-commerce platforms, while Kobo is the most social eBook service on the market and one of the world’s largest eBook stores with over 2.5 million titles. This transaction will greatly strengthen our position in our current markets and allow us to diversify quickly into other countries and e-commerce categories.”

Upon closing the acquisition, Kobo will continue to maintain its headquarters, management team and employees based in Toronto, Ontario.

The global eBook market is one of the fastest growing segments of the consumer technology industry, with a compound annual growth rate of 36% through 2015*. The global content market size is also expected to grow dramatically to reach approximately US$10.6 billion per year by 2015 (estimates exclude China).
*Sources: Based on forecasts by IDC, Yankee, BCG analysis & NRI for Japan 1USD= 80JPY

The transaction is subject to customary closing conditions, including approval by Canadian regulatory authorities in accordance with the Investment Canada Act and is expected to close in Q1 2012.

It strikes me that this is a good exit for Kobo and a nice entry for Rakuten. Kobo has always, always been at the forefront of eBooks. You can, without a hesitation, find them on almost every mobile platform you’d care to mention. That’s why I’ve bought quite a few books with them to date. I love the fact that whatever device I use, I can *always* get my Kobo books through their native app.

I was particularly taken with this sentence in the above release:

…as it [Rakuten] continues to expand its unique B2B2C borderless e-commerce business globally, by adding an ecosystem to provide downloadable media products to consumers, starting with eBooks.

Starting with eBooks, eh?

Bring it on. Let’s see what else they’ve got up their sleeves. Kobo looks like an excellent platform on which to build. I look forward to seeing what’s next.

Congratulations to all parties!

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

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