Exclusive Japan’s Rakuten is weighing a US IPO for the credit card business, sources said

By Miho Uranaka and Sam Nussey

TOKYO (Reuters) – Japanese e-commerce and financial heavyweight Rakuten is considering an initial public offering of its credit card business in the United States, according to two sources familiar with the matter.

Rakuten began considering a possible U.S. listing of one of Japan’s largest credit card companies last month, the sources said. Considerations are still in the early stages and there are other possible options, including a stake sale to a strategic buyer, one of the sources said.

One catalyst for Rakuten Card’s consideration of a U.S. IPO was rival SoftBank’s plans to list app pay operator PayPay in the U.S., the source said. The sources were not named because the information is not public.

The company’s consideration of a U.S. IPO has not been previously reported.

Rakuten did not respond to requests for comment. The company’s shares extended gains after the Reuters report, closing up 4.7%, compared with a 1.6% rise in the Topix index.

Mizuho Financial Group acquired a 15 percent stake in Rakuten Card for 165 billion yen ($1.1 billion) last year, valuing the company at more than 1 trillion yen, or $7 billion, with the launch of shared credit cards.

For PayPay, institutional investors see a base valuation of 2 trillion yen, but expect the valuation could exceed 3 trillion yen in its initial public offering, which could take place as early as December, Reuters reported this week.

CARDS CENTRAL TO RAKUTEN’S BUSINESS

Rakuten, led by founder and CEO Hiroshi Mikitani, has shaken up the Japanese financial sector by simplifying the process of applying for credit cards and making them available to a wider range of consumers.

Credit cards are a key part of a network of Rakuten businesses that includes online shopping, banking, travel and other services, with customers earning loyalty rewards points through payments.

Rakuten listed Rakuten Bank in Tokyo two years ago when the group suffered heavy losses due to the launch of a mobile network.

Rakuten also announced plans to take Rakuten Securities public, but Mizuho raised funding by taking stakes in its brokerage and card businesses.

Rakuten Card has issued more than 30 million credit cards in Japan. The company’s non-GAAP operating profit rose 20% to 62 billion yen last year, but fell 4.5% in the April-June quarter of this year due to higher costs compared to the same period last year.

Rakuten Card is aiming to increase profits to 100 billion yen in the medium term and is looking to expand business with corporate customers, CEO Koichi Nakamura said in March.