Exclusive-Japan's Rakuten weighing US IPO of credit card business, sources say

By Miho Uranaka and Sam Nussey TOKYO (Reuters) -Japanese e-commerce and finance heavyweight Rakuten is weighing an initial public offering in the United States of its credit card business, according to two sources familiar with the matter. Rakuten began considering a potential U.S. listing of one of Japan's largest credit card businesses last month, the sources said. The considerations are in the early stages, with other potential options including a stake sale to a strategic buyer, one of the sources said. One trigger for considering a U.S. IPO of Rakuten Card was rival SoftBank's plans to list app pay operator PayPay in the U.S., the source said. The sources declined to be named as the information is not public. The company's considerations of a U.S. IPO had not been reported previously. Rakuten did not respond to requests for comment. The company's shares extended gains after the Reuters report and closed up 4.7%, compared with a 1.6% rise in the Topix index. Mizuho Financial Group acquired a 15% stake in Rakuten Card for 165 billion yen ($1.1 billion) last year, valuing the business at more than 1 trillion yen, or $7 billion, with the two launching joint credit cards. For PayPay, institutional investors see a baseline valuation of 2 trillion yen, but expect the valuation could exceed 3 trillion yen in the IPO that could take place as early as December, Reuters reported this week. CARDS CENTRAL TO RAKUTEN'S BUSINESS Rakuten, which is led by founder and CEO Hiroshi Mikitani, shook up Japan's finance sector by simplifying the process for applying for credit cards and making them available to a wider range of consumers. Credit cards are an important part of a web of Rakuten businesses spanning online shopping, banking, travel and other services, with customers accruing loyalty reward points by making payments. Rakuten listed Rakuten Bank in Tokyo two years ago as the group reeled from heavy losses due to launching a mobile network. Rakuten also announced plans to list Rakuten Securities, but Mizuho injected funding by taking stakes in the brokerage and card businesses. Rakuten Card has issued more than 30 million credit cards in Japan. Non-GAAP operating profit at the business grew 20% to 62 billion yen last year but fell 4.5% in the April-June quarter of this year compared to the same period a year earlier due to higher costs. Rakuten Card aims to expand profit to 100 billion yen over the medium term and is looking to expand its business with corporate customers, its CEO Koichi Nakamura said in March. The IPO considerations come as companies around the world are looking to list in the U.S. as they seek higher valuations. The U.S. IPO market has had its busiest quarter since the fourth quarter of 2021, with companies raising $24 billion through first-time share sales in the third quarter, according to Dealogic. ($1 = 152.0900 yen) (Reporting by Miho Uranaka and Sam Nussey; Editing by Jamie Freed)

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