Rakuten acquires Play.com for £25 million

I don't have any knowledge of Play.com's financials but this strikes me as a low valuation. Certainly a wide gap between this and Hut Group's valuation at £300M in June according to the FT ? Hope this proves a positive development for Play as I've always respected them

FT Link http://www.ft.com/cms/s/0/6bc99342-a270-...

Posted:A year ago

Could have been a good M&A on the cheap, for a group looking to enter the mail order/online biz

Posted:A year ago

Agreed Matthew, it does look like they bought it on the cheap, It was only in April that play.com hired Lazard to explore a capital increase as it wanted an "aggressive" European expansion (bloomberg)

Considering play.com is the UK's 6th biggest e-retailer, I think there is more to this deal then they have published, maybe some equity in Rakutan for the shareholders?

Posted:A year ago

I definitely agree Matthew that this seems like a very low valuation of what must be one of the country's top online entertainment retailers - I wouldn't be surprised if in their specific field they were second only to Amazon.

Bit sad to see yet another good British business bought out by a larger overseas company, but such is the nature of capitalism.

Posted:A year ago

In fact the GI.biz article is incorrect, the acquisition price was £25m not $25m (as detailed in the Rakuten press release). However this does little to impact the impression that the transaction undervalues the business. According to the Guardian, Play.com has annual sales of c. £500m so either it is heavily loss-making and this is a firesale or the press release excludes important transaction details such as the assumption of significant debt or sizeable potential earn-out terms.

Posted:A year ago

As long as this doesn't affect prices of items on the site, this news doesn't bother me too much, But i was never aware how strong our british E-commerce business model was.

Posted:A year ago

Nick - good points, in absence of further details it's hard to draw any definitive conclusions. Intrigued to see how Rakuten will impact on the business. At the very least I'd anticipate some "rationalisation"/centralisation of back end systems across their back end systems and processes for their various online brands.

Posted:A year ago

do we even know how successful or what rakuten does well?

Posted:A year ago

Dr, their stock value has increase 50% over the past year, so investors feel they are doing something right, I'm not 100% on what they do in Japan, but they have been buying similar sites in Europe over the past 12 months. Company description:

"Rakuten, Inc. operates and manages business to consumer electronic commerce
site, Rakuten Ichiba, and consumer to consumer auction site, Rakuten Freemarket.
The Company generates sales from system service fees and advertising fees from
electronic commerce companies listed on its web site."

Posted:A year ago

@ Glen - looks like Rakuten are actually a behemoth in japan and as you say doing extremely well

"Rakuten's 2005 revenues exceeded US$1.1 billion with operating profits of approximately $320M. The company is publicly-traded (JASDAQ: 4755) with a market capitalization ranging from $5B+ and more than 3,700 employees. Rakuten is among the top 10 largest Internet companies in the world "

Posted:A year ago

Nick, Matthew, right on the nail I think. The valuation points to a failing business model, an inability to maintain market traction in challenging times and perhaps little to no market growth. Play and the Jersey advantage no longer drives the company, their pricing model is no longer the most economic on the web and bigger players consistently price below Play. Clearly we are not party to all the information so we can muse about why the valuation is so low but having no facts its difficult to say.

Posted:A year ago

Based on this article in Guardian, it looks like it's all about change in legislation which will stop them from using a current VAT loophole - that's most likely the reason behind the low valuation: http://www.guardian.co.uk/business/2011/...

Posted:A year ago

Hi Raf = thanks for the link.

Personally I think closing of the VAT loophole is a factor but not necessarily the most important. Assuming the loophole is closed Play will remain competitive against bricks & mortar retailers and also have more buying power & customer intelligence than many online retailers.

My gut instinct is compared to other online retailers Play may be overdependent on physical sales of DVD, Games & Music which are declining or moving to alternative models - F2P etc.

Posted:A year ago