Big Deals: Rakuten’s Acquistion of Kobo

Highly publicized, intense and complex – it was a deal that had it all. Tokyo-based e-commerce giant Rakuten purchased e-reading service Kobo Inc. for US$315 million, in a deal that further expands Rakuten’s business globally. The deal was announced on November 8, 2011, and closed on January 11.

Rakuten – which Kobo CEO Michael Serbinis has called the Amazon of Japan – has strong distribution channels worldwide, including the US-based Buy.com, and saw synergies with Kobo’s devices and social network. (Kobo was founded in 2009 by Indigo Books & Music.)

Kobo’s the only one in Canada that does e-books and our client was one of the top three in the world in terms of e-commerce, so it was a good combination, 

says Beryl Green of Miller Thomson, who co-led the deal along with M&A specialist Steven Wesfield

Green has extensive contacts in Japan, having worked with Japanese clients throughout her career. She helped steer Rakuten through the deal with her knowledge of Japanese culture, while Wesfield did most of the negotiation. According to Wesfield,

There were some really unique aspects to the transaction; some significant IP and IT-related components; a need for consent from the Minister of Canadian Heritage … It was a lot of intense work over a relatively short period of time.

Not to mention the fact that there is a 14-hour time difference between Toronto and Japan.

I had calls from the client on my cell phone at 5:30 or 6 in the morning on more than one occasion. You would wake up and have your entire inbox full of all sorts of e-mails; we had  conference calls at 11 at night. If you wanted action on something, you needed to make sure you got it to them in a reasonable window that would work within their timeframe.

But despite any logistical challenges and the complex nature of the deal, the ultimate goal was reached: a signed agreement. And one that has real implications for the Canadian book publishing industry.

Miller Thomson LLP represented Rakuten Inc. with a team that included Beryl Green, Steve Wesfield, Jason Rosen and Steven Oh, with the assistance of articling students Mara Banack and David Carter (M&A), Robert Stewart (securities), Sean Rimoin (financing), Lyne Gaulin (tax), Lisa Goodfellow (employment), Andrew Roman (foreign investment and competition), Eugene Gierczak, Fraser Mann and Tai Nahm (intellectual property and information technology) and Joe Marin (insolvency), with the assistance of senior law clerk Karen Lilley (corporate services). Otterbourg, Steindler, Houston & Rosen, P.C. in New York acted as US counsel to Rakuten in connection with the acquisition of the shares held by one of Kobo’s insolvent shareholders, Borders Group Inc., with a team that consisted of Jeffrey Cymbler and Jenette Barrow-Bosshart (insolvency).

Indigo Books & Music was represented by its General Counsel, Kathleen Flynn and by Torys LLP with a team that included Guy Berman, Jamie Becker, Christine Hunter (corporate), Rob Prichard, Omar Wakil, Damien Liddle (regulatory), Mitch Fraser (employment), Amanda Balasubramanian, Simon Williams (lending) and John Unger (tax).

Kobo was represented by its General Counsel, Nicholas Catros and by McCarthy Tétrault LLP with a team that included George Takach (M&A, IP and IT), D.J. Lynde (corporate), James Gannon,  Ryan Prescott (IP and IT), Bram Abramson (IT and foreign investment), Oliver Borgers, Michele Siu (foreign investment and competition) and Patrick McCay (tax).

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