Rakuten Surges Most in 18 Years After Tencent, Japan Post Invest

(Bloomberg) -- Rakuten Inc. shares recorded their biggest gain in 18 years after investors bet that a $2.2 billion stake sale and deepening collaboration with partners like Tencent Holdings Ltd. and Japan Post Holdings Co. will help the company acquire customers and shore up its logistics network.

The stock rose its maximum of 24.1% in Tokyo, pushing Rakuten’s value up by more than $3 billion, after it announced Friday it was raising 242 billion yen selling stock to investors including Tencent, Japan Post and Walmart Inc. Japan’s e-commerce pioneer intends to use the funds to expand its capabilities in artificial intelligence, financial technology and mobile networks. It recently became the fourth mobile carrier in its domestic market, undercutting the incumbents with aggressive pricing.

Read more: Rakuten to Raise $2.2 Billion as Japan Post, Tencent Invest

The deal is expected to help bankroll Rakuten’s costly effort to build out its delivery network and compete with Amazon.com Inc. It plans to create joint logistics centers with Japan Post, sharing data and delivery and pick-up systems to improve efficiency.

Bringing together Rakuten’s more than 100 million members and Japan Post’s last-mile access to every household and a network of 24,000 post offices, the two will set up counters where people will be able to sign up for Rakuten’s mobile service and make use of its other services. They’ll also collaborate on cashless payments and insurance, the companies said Friday.

“When we imagine how this alliance could develop, one possibility is the creation of a super-app connecting the real and online worlds,” Citigroup analysts Koichi Niwa and Mitsunobu Tsuruo wrote in a Monday note. “If the tie-up works well, we expect it to contribute materially to improved competitiveness at Rakuten.”

Hooking up with Tencent will offer a window into the vast Chinese internet market and help Rakuten with its efforts to expand its ecosystem to include more gaming, Hiroto Furuhashi, a managing executive officer at Rakuten, said in an interview.

(Updates with analyst comment in fifth paragraph)

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