SoftBank, Line Corp seek to create Japanese internet giant

TOKYO — Two weeks ago, SoftBank Group of Japan announced it had lost billions on soured investments in some of the world’s biggest tech startups. On Monday, it said it was ready to roll the dice again.

The company announced an agreement to merge its Yahoo Japan subsidiary with Line, a dominant messaging app company, to create a Japanese internet goliath that would be able to compete against bigger and better-financed tech firms in the United States and China.

The combination would bring together two prominent Japanese companies that have seen better days. Yahoo Japan, formed in 1996 as a joint venture with Yahoo, offers a range of services including online shopping and news, but has struggled to make the move from desktops to mobile phones.

Line’s chat app has 82 million users in Japan, but has struggled to expand its user base. The company fell into the red last year and has continued to book losses.

Line’s chief executive, Takeshi Idezawa, said at a news conference Monday that the merger would help make Japan more competitive globally in the industries of the future.

The tech world is becoming “winner take all,” said Idezawa, who noted that the leading global companies were developing monopolies on everything from human resources to finance.

Competitors’ “strengths are growing even stronger, and the gap between those companies and the rest is widening,” he said. “As every industry becomes increasingly digital, the effect of that on national power and cultural diversity is an important issue.”

The deal requires approval from shareholders and government regulators, who are likely to give close scrutiny to a linkup of two of Japan’s most powerful internet firms. The companies said they plan to complete the merger by October.

SoftBank and Naver, the South Korean company that owns a majority stake in Line, said Monday that they had reached a memorandum of understanding to take Line private as the first step in a complex financial arrangement that would result in Yahoo Japan and Line being held by Z Holdings, the publicly listed company that operates Yahoo Japan.

Z Holdings and Naver are considering an offer to Line’s minority shareholders of 5,200 yen, or $47.78, per share. At that price, each firm would spend more than $1.5 billion on the transaction.

By adding Line to its portfolio, SoftBank would get access to the messaging service’s users in Japan, and tens of millions more elsewhere in Asia, including Thailand, Taiwan and Indonesia.

In theory, that would allow the companies to merge their various offerings to create a super app that could serve as a gateway to all of their services. With the government pushing to move Japan away from its stubborn attachment to cash, the deal also sets SoftBank up to cement its control over the country’s small but growing mobile payment industry by combining its company PayPay, which leads the market, with Line’s service, Line Pay.

Analysts and investors hailed the deal.

“There are a lot of synergies,” said Mitsunobu Tsuruo, an analyst at Citigroup Global Markets Japan.

“Line is the strongest messaging company, and Yahoo is a strong domestic media company,” he added. “There are very few overlapping areas.”

Those synergies will be critical if the companies hope to stay competitive in their domestic market.

Line had one of the biggest public offerings of 2016, with investors flocking to the company based on its high revenue from advertising and sales of digital cartoon stickers that users can send to their friends.

The illustrations, which cost a little over $2, include Disney characters and Line’s own mascots, which have become popular enough that they have their own shop in Tokyo’s trendy Harajuku neighborhood.

But since then, the company has lost money as it works to promote its mobile payment service.

SoftBank, too, is facing tough times.

Just weeks ago, SoftBank Group posted a $4.6 billion loss from its investment in WeWork, the embattled office space company. WeWork’s value has crumbled after its attempt at a public offering collapsed under scrutiny of the company’s business model and accusations of self-dealing by its founder, Adam Neumann.

SoftBank, which is the world’s largest tech investor, has used its $100 billion Vision Fund to pick winners and losers in the startup world. But its investment model has come under increasing scrutiny over its large and sometimes quixotic bets on loss-making companies like Uber and the on-demand dog walking company Wag.

At a news conference after the announcement of SoftBank’s financial results, the company’s chief executive, Masayoshi Son, said that he regretted some of his decisions involving WeWork, but that he would not change his company’s underlying strategy of placing big wagers on companies that he believed had the potential to transform entire industries.


2019 The New York Times Company

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Ford, VW call off joint auto show appearance to announce alliance

DETROIT -- The Detroit auto show was abuzz over what Ford and Volkswagen would announce Tuesday, after the car giants called off a joint appearance during which they were widely expected to announce an alliance.

The two car giants have been in discussions for more than 6 months over a partnership to develop self-driving and electric technologies. But a source close to the talks told AFP that they had so far only produced a deal over commercial vehicles.

A highly-anticipated announcement at the US's premiere auto show in the Motor City was called off late Monday, and the two sides planned a conference call with reporters instead for the following morning.

"We don't have enough details yet to go out in front of more than 500 journalists, so we decided to call it off," Ford spokesman Mark Truby told AFP.

Earlier in the day, Ford Chairman Bill Ford had told reporters that discussions were going well but that they would have "more to say later this week."

Both Ford and Volkswagen CEO Herbert Diess appeared optimistic about a potential partnership.

"Volkswagen is a really big car company worldwide... but we are not as big in small commercial vehicles," Diess told the Detroit Free Press newspaper.

"So we decided to join forces there. And we will become very, very competitive together in this segment -- which consists of small commercial vans and small and midsize pickup trucks."

TRUCKS AND SPORTS CARS

Aside from the abrupt cancellation by Ford and VW, the show began as scripted, with SUVs, trucks and sports cars center stage, with extra showmanship to pump up the excitement despite fewer carmakers and more uncertainty this year.

Automakers have all but abandoned compact cars and sedans, an ever-shrinking portion of the North American market, as evidenced by what models were on display.

Trucks, SUVs and high-performance vehicles dominated the new debuts. Volkswagen was among the few exceptions with a new Passat sedan.

For the first time, Ford publicly displayed a redesigned Explorer SUV, including a hybrid version, which first debuted in Detroit on Friday.

Fiat Chrysler unveiled redesigns of larger models of its popular Ram truck.

For those looking for an alternative, carmakers were emphasizing sporty cars and nostalgic pasts -- largely eschewing the traditional sedan in favor of flashier options.

With a flair of showmanship that included virtual-reality goggles and a sports car levitating down from the ceiling, Ford revealed a high-powered version of the Mustang called the Shelby GT500 -- boasting of more than 700 horsepower.

A practically jubilant Akio Toyoda introduced a refresh of his beloved sports car Supra, which Toyota stopped producing 17 years ago.

Toyoda trotted out Spanish racecar driver Fernando Alonso to attest to the car's racing authenticity with an everyman appeal.

"It's like a race car you can drive quite comfortably every day," Alonso said during a scripted presentation.

FUTURE 'LESS POSITIVE'

Aside from VW, German carmakers abandoned the Detroit show this year, amid competition from events in New York, Miami and Las Vegas where increasingly tech-centered car announcements were presented.

Hoping to revitalize the show, organizers were holding the event for the last time in January and will move to June next year to allow for outdoor activities such as test drives.

For the industry at large, the hope was that bigger and more profitable SUVs and trucks would help weather economic storms -- whether from tariffs or fewer consumers buying cars due to rising prices, higher interest rates or a lagging world economy.

Analysts predicted slowing sales in 2019, following a decade of growth.

The Detroit show was also clouded by uncertainty in US trade policy.

Beijing and Washington remained locked in a trade war that could escalate as soon as next month, when the Commerce Department is expected to deliver a report on possible new auto tariffs.

Analysts predict rapid contraction in the auto industry should more tariffs take effect.

"Tariffs would be devastating to the entire industry," said Robert Carter, chief of Toyota's North American sales, adding that vehicle prices would increase and suppress sales.

"Not only would it affect the Toyota brand, it's going to affect every brand in the industry, every car in the industry."

The president of Chinese automaker GAC, Yu Jun, said the ongoing trade war had delayed the company's entry into the US market from 2019 to the first half of 2020.

"We have postponed our plans due to the recent development on trade. We're making steady progress towards it," Yu said, according to a company interpreter.

source: news.abs-cbn.com

YouTube partners with Katy Perry, Lady Gaga music conglomerate

NEW YORK - YouTube said Tuesday that it had sealed a licensing agreement with the world's largest music label conglomerate Universal as the video behemoth explores creating a new streaming service.

YouTube, which is part of Google, said it reached a long-term agreement with the Universal Music Group, months after a deal with competitor Warner Music. Universal artists include Katy Perry, Lady Gaga, U2, The Weeknd, Shawn Mendes and Kanye West.

A joint statement did not specify the terms but hinted that the agreement would address compensation by YouTube, a constant source of irritation within the music industry.

"This important step forward provides our recording artists and songwriters improved content flexibility and growing compensation from YouTube's ad-supported and paid-subscription tiers," Universal chairman and CEO Lucian Grainge said in the statement.

He said the agreement also advanced "YouTube's commitment to manage music rights on its platform."

The recorded music industry has posted 2 years of solid growth after years in the doldrums thanks to the rapid growth of subscriptions on Spotify, Apple Music and other streaming platforms.

But the industry, led by the IFPI trade group, has long berated YouTube for the rates it pays.

YouTube argues that it pays a fair price. With the video site's focus on user-generated content, YouTube enjoys protection under United States law that largely absolves internet companies from responsibility for users' activities.

With Google languishing behind in music streaming, several technology sites reported last month that YouTube is preparing the launch of its own streaming service in 2018.

The video site already has a YouTube Music platform and the advertising-free YouTube Red subscriptions, but it is reportedly looking to set up a more elaborate site on the model of the major, on-demand music services.

The licensing agreements would be vital for a successful YouTube streaming service, with music fans unlikely to embrace a platform that has glaring gaps in its catalog.

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Google, Walmart unveil e-commerce partnership

SAN FRANCISCO - Google and Walmart on Tuesday announced a partnership that would make the retailer's products available on the internet giant's online shopping mall.

"Starting in late September, we'll be working with Google to offer hundreds of thousands of items for voice shopping via Google Assistant -- the largest number of items currently offered by a retailer through the platform," Marc Lore, Wal-Mart's head of e-commerce, said in a blog post.

Walmart will integrate Google Express, which already allows customers to purchase products of a large range of brands, such as Costco and the pharmacy Walgreen's, into its platform in a bid to take on online shopping giant Amazon.

Amazon has long made life difficult for Wal-Mart on the internet and is now also competing with it in the real world with its planned acquisition of supermarket chain, Whole Foods.

Wal-Mart's third-quarter results, released earlier this month, once again highlighted its persistent lag behind Amazon, even if the numbers were better than expected.

Google is also looking to expand its activities in online shopping, grouped together under its Google Home brand.

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Jollibee to enter Italy, European market

MANILA - Jollibee is forming a joint venture with a Singaporean partner BlackBird to own and operate the first Jollibee store in Italy, its first in Europe.

The Jollibee group will own 75% of the joint venture, while BlackBird will own the remaining 25%. Both have committed to invest up to 1-million euros for the joint venture. The strategy is to tap a territorial franchisee for Italy, which can develop and expand the brand in the market.

BlackBird is a Singaporean company engaged in food and beverages and human resource activities. It was incorporated in 2014.

"Expansion to Italy is in line with diversification efforts. They are present outside Philippines, they are in China, the Middle East and the US. I guess, eventually, growth in the Philippines will slow down because they have so many stores here already," says COL Financial's April Lee Tan.

Tan adds, the important questions about this venture are: (1) Are they going to inject just the Jollibee brand? (2) Are they going to target the Filipino market or the European Market? (3) Are they going to do what they did in the US or China where they bought existing brands and used their expertise to build brands?

Tan admits, valuation is still a big concern for Jollibee investors.

"When you are priced at a premium, nothing can go wrong, at this stage, Jollibee will encounter challenges, rise in commodity prices, cost of labor. With that -- it's difficult to justify its share price."

But Tan says, these problems are temporary, and should be overcome in 1-2 years time.

JFC shares are down 0.4% in morning trade to P196.70. It's down 1.3% year to date.

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