Pinterest Stake Fuels Rakuten's Quest to Be a Global Player

Facebook (FB) isn’t the only Silicon Valley social networking company making news.

On Thursday, the same day Mark Zuckerberg’s company announced it had raised $16 billion in the biggest IPO by a technology company, Japanese e-commerce company Rakuten (4755) announced it is leading a group to invest $100 million in rival Pinterest. The deal gives a valuation of about $1.5 billion to the Palo Alto (Calif.)-based startup, which operates a site that allows users to share photos on virtual bulletin boards.

Rakuten is big in Japan, but with the economy in the doldrums and the population aging rapidly, the company can’t rely on the home market to fuel its growth. Hence, Chairman and Chief Executive Officer Hiroshi Mikitani’s campaign to transform Rakuten into a global player that can compete in the U.S. and elsewhere against the industry’s heavy hitters. Mikitani has made English the official language of the company. Rakuten, which acquired Buy.com in 2010, last November announced the purchase of Kobo, the e-reader that is No. 3 in the U.S. behind Kindle and Nook. He’s made deals in Europe and Asia. And now there’s the investment in Pinterest.

Mikitani is not your usual staid Japanese CEO. Ranked No. 161 on the Forbes rich list, Mikitani is a 47-year-old entrepreneur with an MBA from Harvard who gave up a career in banking to launch Rakuten in 1997. Today it’s the country’s biggest cybermall. Mikitani is also chairman of Rakuten Baseball, which owns the Pacific League team the Tohoku Rakuten Golden Eagles. The team is based in Sendai, the northeastern city that was hit hard by last year’s earthquake and tsunami. After the disaster and the crisis at the Fukushima nuclear power plant, Mikitani quit the Keidanren business lobby to protest its support for Japan’s continued reliance on nukes.

Mikitani has had his setbacks. For instance, he tried to get a piece of the booming Chinese market by teaming up with search engine Baidu (BIDU), but that partnership went nowhere and last month Rakuten announced it was giving up on the business. After buying Kobo, which is well ahead of Nook outside the U.S., Rakuten figured it had a clear shot at being the main alternative to Amazon (AMZN) worldwide. That was before Microsoft (MSFT) and Barnes & Noble (BKS) joined forces. With the software giant now allied with the U.S. bookseller, the Nook stands to be a much more formidable competitor.

How does Pinterest fit into Mikitani’s plans? Mikitani says there’s a lot of overlap between e-commerce and social networking. Taking a page from Pinterest’s playbook, Rakuten will soon add “pin it” buttons on its site so users can share pictures of would-be purchases.

“While some may see e-commerce as a straightforward vending machine-like experience, we believe it is a living process where both retailers and consumers can communicate, discover, and curate to make the experience more entertaining,” he said in a May 17 statement. “We see tremendous synergies between Pinterest’s vision and Rakuten’s model for e-commerce. Rakuten looks forward to introducing Pinterest to the Japanese market as well as other markets around the world.”

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Global M&A at Lowest Level Since Mid-2010

December 29, 2011, 6:34 AM EST By Serena Saitto

Dec. 29 (Bloomberg) -- The value of global takeovers dropped to the lowest level in more than a year this quarter, and dealmakers say Europe’s debt crisis may hamper a recovery in 2012 as cash-rich companies hold off on major purchases.

Mergers and acquisitions have slumped 16 percent from the previous three months to $457.1 billion, putting the fourth quarter on course to be the slowest since at least mid-2010, according to data compiled by Bloomberg. For the year to date, announced takeover volume has risen less than 3 percent to $2.25 trillion after regulatory hurdles scuttled AT&T Inc.’s bid for T-Mobile USA, which would have been 2011’s biggest deal.

Tightening credit markets, the risk of a euro-zone collapse and stock-market swings have deterred companies from pursuing transformational deals that would spur sales growth, M&A bankers said. Earlier in 2011, more favorable conditions emboldened acquirers to part with stockpiled cash, such as Johnson & Johnson’s $21.3 billion bid for Synthes Inc. and Express Scripts Inc.’s $29.1 billion offer for Medco Health Solutions Inc.

“There’s definitely pent-up demand for M&A as well- capitalized companies continue to focus on opportunities for strategic acquisitions,” said Yoel Zaoui, co-head of global M&A at Goldman Sachs Group Inc. “The key driver for M&A, however, is confidence, and in Europe, at the moment, that is lacking.”

Seven of the year’s 10 biggest deals were announced before August, when European markets fell the most since October 2008 amid a global stock rout and Standard & Poor’s cut the U.S. credit rating. Goldman Sachs is the top adviser on global takeovers for 2011, with $537 billion of deals this year, followed by JPMorgan Chase & Co. and Morgan Stanley, Bloomberg data show. This year’s growth in M&A volume compares with a 24 percent jump in 2010.

‘Wait and See’

Europe’s financial crisis will stifle lending, push the region into recession and weigh on the U.S. economy through early 2012, Jan Hatzius, Goldman Sachs’s chief economist, said on a Nov. 30 conference call. The euro zone’s unemployment rose to 10.3 percent in October, the highest since the currency began in 1999.

As the European crisis deepened, “dealmakers entered a wait-and-see mode, and that’s where we are now,” said Paul Parker, global head of M&A at Barclays Plc in New York. “Offsetting forces such as companies’ cash piles and low valuations should drive the recovery of M&A activity in the second half of the year.”

The MSCI World Index of about 1,600 companies trades for 12.6 times reported earnings, showing equities in developed economies are cheaper than they’ve been more than 95 percent of the time since 1995, according to data compiled by Bloomberg. Those companies are also sitting on $5.3 trillion in cash, the data show.

Antitrust Hurdles

Companies that did tap funds this year may not be able to complete their purchases as regulatory scrutiny threatens to derail more takeovers. Express Scripts’s offer for Medco, which would create the largest U.S. manager of pharmacy benefits for employers, insurers and union health plans, has prompted state inquiries over whether the combination would command too much market power.

AT&T abandoned efforts to buy T-Mobile USA from Deutsche Telekom AG this month after the U.S. Justice Department sued the companies in August, saying a combination would substantially reduce competition. Companies contemplating similar deals may hold off until the next presidential election in the hope that a Republican White House would make it easier to win approval for big transactions, said Jeffrey Silva, a Washington-based policy analyst with Medley Global Advisors.

European Deals

Deutsche Boerse AG and NYSE Euronext this week delayed the deadline for completing their merger until March 31 as the exchange operators try to persuade European Union regulators to approve the deal. While the U.S. cleared the combination, the EU has told the companies that concessions they offered to allay antitrust concerns don’t go far enough, two people familiar with the talks said this month.

Dealmaking involving European companies rose 2.2 percent this year, bolstered by the first half. For the fourth quarter, announced volume sank 14 percent from the previous three months to $161.4 billion. Valuations have also dropped, making the MSCI Europe Index even cheaper than the MSCI World Index at 10.8 times earnings. That may create opportunities for buyers from nations such as China.

“Chinese companies have been very successful at buying natural resources in emerging markets, and they are now very supportive of buying industrial assets in Europe,” said Thierry d’Argent, global head of M&A at Societe Generale SA in Paris.

Asia Pacific

French dairy-product maker Yoplait and the aviation unit of Royal Bank of Scotland Group Plc both attracted interest from Chinese bidders this year, according to people with knowledge of those negotiations.

The value of acquisitions involving Asia Pacific companies rose 3.8 percent to $698.4 billion this year, according to Bloomberg data. The biggest deal was Nippon Steel Corp.’s proposed takeover of Sumitomo Metal Industries for about $22 billion, including debt. That was followed by BHP Billiton Ltd.’s purchase of Houston-based oil and gas explorer Petrohawk Energy Corp.

Foreign buyers also spent more on Asia Pacific in 2011 than any year since 2007, according to the data. The largest overseas bid was SABMiller Plc’s $10 billion takeover of Australian beer maker Fosters Group Ltd., the data show. Among Asian countries, Japan overtook China as the biggest acquirer of foreign assets for the first time since 2008 after the March 11 earthquake spurred companies to retrench.

Japan’s Takeovers

“Japanese industries had been shrinking, and companies needed growth drivers,” said Kenji Fujita, head of M&A advisory at Mitsubishi UFJ Morgan Stanley Securities Co., the Tokyo-based investment banking venture of Morgan Stanley and Mitsubishi UFJ Financial Group Inc. “The earthquake raised the urgency for that.”

Japan’s Kirin Holdings Co. bought Brazilian beermaker Schincariol Participacoes e Representacoes, and China Petrochemical Corp., or Sinopec, agreed to purchase a 30 percent stake in Galp Energia SGPS SA’s Brazilian unit.

Still, after a record-high volume of $161 billion in 2010, the volume of announced deals involving Brazilian companies tumbled to $98.3 billion this year as the Brazilian real strengthened while the country’s economy slowed.

“I’m glad to leave 2011 behind,” said Flavio Tavares Valadao, head of corporate finance at Banco Santander do Brasil SA, based in Sao Paulo. “Deals are difficult to make and companies are worried for the future.”

Brazilian Deals

Santander worked on Telefonica SA’s merger of its Brazilian fixed line unit, Telecomunicacoes de Sao Paulo SA’s with its mobile unit, Vivo Participacoes SA. The Spanish bank also advised Spain’s Iberdrola SA on the acquisition of Brazil’s Elektro Eletricidade & Servicos SA for 1.77 billion euros ($2.3 billion).

Dealmakers predict that technology, industrials, natural resources and health care will continue to be the sectors most actively consolidating, especially if European policy makers can prevent financial turmoil from spreading to more countries.

“Companies need to have more confidence that we aren’t going to have a break-up of the euro,” said Mark Shafir, global head of M&A at Citigroup Inc. “If you got that cleared up, then the first half of next year could be a lot better than the second half of 2011 has been.”

--With assistance from Aaron Kirchfeld in Frankfurt, Jeffrey McCracken in New York, Takahiko Hyuga in Tokyo, and Jacqueline Simmons and Matthew Campbell in Paris. Editors: Julie Alnwick, Jennifer Sondag.

To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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Dropbox Working With Partners for Global Growth

May 30, 2011, 8:40 PM EDT By Ari Levy

May 31 (Bloomberg) -- Dropbox Inc., the Web storage provider with 25 million users, signed deals with mobile carrier Softbank Corp. and handset maker Sony Ericsson Mobile Communications AB to attract more customers in Asia and Europe.

The agreement means Dropbox’s file-sharing application will be preloaded on two phones running on Softbank’s network in Japan in early June, said Lars Fjeldsoe-Nielsen, head of mobile business development at Dropbox, in an interview. Sony Ericsson is building the app into devices that will be sold in 10 countries in Europe and Asia.

The partnerships are the first for San Francisco-based Dropbox, a startup whose app has surged in popularity as consumers turn to smartphones to take pictures, create videos and listen to music. The app lets users store and access their content from any computer, phone or tablet with a Web connection.

“Whenever you do anything that can be stored, consumed or shared, we want to become part of that,” said Fjeldsoe-Nielsen, who joined the company in January. “We’re working with the guys who are moving the fastest.”

Terms of the partnerships aren’t being disclosed. Softbank and Sony Ericsson will be promoting the app in stores and commercials, while also training sales staff so they can demonstrate it to customers.

Dropbox’s app is currently available as a free download on Apple Inc.’s iPhone and iPad, devices running Google Inc.’s Android operating system and on Research In Motion Ltd.’s BlackBerry smartphones. The company expects to sign marketing and distribution deals later this year with U.S. carriers and manufacturers.

Freemium Pricing

Founded in 2007 by Drew Houston and Arash Ferdowsi, Dropbox uses a tiered-pricing model, called freemium, giving away the basic app and charging users who want more space. The free version comes with 2 gigabytes of storage, enough for thousands of documents or hundreds of photos. Beyond that, Dropbox sells as much as 50 gigabytes and 100 gigabytes for $9.99 a month and $19.99 a month, respectively.

Dropbox said last month that more than 25 million people are using the service, a sixfold increase from January 2010. It competes with Box.net, an Internet-storage company that raised $48 million in February from investors including Andreessen Horowitz. Box.net, based in Palo Alto, California, has almost 6 million users.

With the Softbank partnership, Dropbox will come automatically loaded on two Android phones in Japan, one with a 3-D screen manufactured by Sharp Corp. Tokyo-based Softbank, Japan’s third-largest wireless carrier, will be promoting the devices in about 7,000 stores in Japan.

Softbank Price Break

In addition to the two free gigabytes that come with the app, Softbank is adding 50 percent more at no charge, the Tokyo- based company said in an e-mail.

Sony Ericsson, the London-based mobile-phone venture of Sony Corp. and Ericsson AB, is selling Android phones with the Dropbox app pre-installed in countries including the U.K., Denmark, Australia and Indonesia, starting today.

Chief Executive Officer Bert Nordberg said in March that the company is aiming to expand its global share of Android handsets to at least 25 percent from 14 percent at the beginning of this year.

Sony Ericsson has similar partnerships, where it promotes apps from Facebook Inc., Twitter Inc. and Foursquare Labs Inc., said Calum MacDougall, Sony Ericsson’s London-based head of Web service partnership.

‘Entertaining Smartphones’

“Dropbox is something that is an exciting and rapidly growing service,” MacDougall said in an interview. “To have the most entertaining smartphones, we need to find partner brands that consumers are using.”

Dropbox was initially funded by Y Combinator, the Mountain View, California-based startup incubator, and then raised $7.2 million from Sequoia Capital and Accel Partners. It now has about 55 employees.

Bryan Schreier, a partner at Sequoia and Dropbox board member, said he’s an avid user of the product in addition to being an investor. For his kids’ birthday parties, he sets up folders that enable everyone involved to take photos and shoot video from their phones and upload the files immediately.

“In real time we’re building a shared photo album that people can access on the Web anywhere,” Schreier said in an interview from his office in Menlo Park, California. “It’s an awesome experience.”

--Editors: Donna Alvarado, Stephen West

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net;

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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