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Rakuten to buy Viber for $900m to expand empire

Japanese e-commerce giant Rakuten Inc, controlled by billionaire Hiroshi Mikitani, will buy call and messaging app provider Viber Media Inc for $900 million in a deal that would more than double the number of users in its digital empire.

Rakuten offers services from financing to shopping to online video on its e-commerce platform, the largest in Japan. But in the face of a shrinking population and weak consumer spending at home, Mikitani is trying to re-invent Rakuten as a one-stop-site for a global audience.

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 all-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 messages 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 counts the United States, Russia and Australia among its biggest markets.

Its chief executive Marco told the same media conference 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, US 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 mobiles, making it a rival to Skype. The acquisition by Rakuten is expected to be completed by the end of March, both companies said.

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 recession-hit retailers are struggling to tempt clients to spend.

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 on December 31, Rakuten’s operating profit jumped 80 per cent to ¥90.2 billion ($882.89 million), marking a sixth consecutive year of record earnings, though lagging the average ¥99.9 billion projected by 18 analysts polled by Thomson Reuters Starmine.