[hugh]

Indigo, the majority shareholder in Kobo, announced today that it has agreed to sell Kobo Inc. to Rakuten, Japan's biggest online shopping mall operator, for US$315 million.

Kobo will continue to function as a stand-alone operation with its headquarters, management team, and employees based in Toronto.

The transaction is subject to customary closing conditions, including approval under the Investment Canada Act, and is expected to close in early 2012.

 

[ava0775]

Really bummed it's not remaining a Canadian company.

 

[bgclarke]

Interesting move.

Not sure how I feel about it honestly....why would they chose to sell now, when e-readers are catching on.

 

[hugh]

Probably because eReaders have become a commodity item with little return. The money is in the digital books and subscriptions, not the hardware.

 

[BGY11]

Good point.

I just hope nothing changes down the road in terms of support and customer service. Yes I saw they are keeping things the same for now but who knows how long that will last?

Overall though this could be a big benefit to Kobo in terms of distribution and provide even better competition for Amazon.

 

[DdDave]

The money is in the digital books and subscriptions, not the hardware.

Agreed. It was a race to the basement in terms of margins, and Amazon finally won with their latest ad supported Kindle versions in the states. The only companies that can really compete with the Amazon strategy are the ones with a big on-line presence selling the content to fill up the devices.

I don't know much about Rakuten, but according to their wikipedia page, they seem to have been on a buying spree lately.

 

[markf]

Seems like a backwards move. Would be like Netflix selling off their streaming division to focus on DVD rentals.

It's disappointing that what should be a Canadian success story is being sold out (for what seems like a relatively low price).

 

[hugh]

I doubt they make much off selling a Kobo reader so $315 million actually seemed like more than its worth.

 

[bgclarke]

I wonder how much it costs to make a Kobo Touch versus what they charger for it.

 

[PokerFace]

IndiGONE by the end of 2013 or early 2014

Most likely merely another hail-Heather pass during the dying months of a near-death company.

I figured Indigo would become Outdigo (perhaps selling outdoor patio furniture and bug zappers) by mid-2012, but it now appears that Heather is willing to drag this current "charade" out until late 2013 or early 2014.

Target has Indigo in its cross-hairs, and after Indigo is killed off, Target can then focus on Walmart and the other big players.

Kobo sales (in the second quarter, ended Oct. 1), were up 219% (to about $41 million buckeroos), but the division apparently operated at a net loss of about $11 million (I'm surprised it wasn't even higher than that). It's still far too early to be confident of future success.

How about a product endorsement by Kobe Bryant? ... Kobe loves his Kobo, and it's a slam dunk that you will too!

Poor (actually quite rich) Heather doesn't seem to know when to quit. First the Plum card, and now this. Heather claims to need about 18 more months to turn things around, so I guess she won't be satisfied until she goes down with the ship.

I assume that towards the end of 2013, Heather will gain some weight and start singing. It ain't over until the fat lady sings, but since miracles can happen at any time (hello, Netflix Canada), I know it ain't over 'til it's over.

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http://www.theglobeandmail.com/news...ime-to-think-outside-the-book/article2231354/

Wednesday, Nov. 09, 2011

“We have to grow very considerably to balance off what we lose in our book business,” said Ms. Reisman, who, with her husband, financier Gerald Schwartz, owns more than half of Indigo. “But I have every expectation that within 18 months, we will fully make that transformation ... I would rather, for shareholders, to employ the funds and deliver to them a great result.”

To fund that shift, Ms. Reisman agreed on Tuesday to sell Indigo’s majority stake in Kobo to Japanese e-commerce player Rakuten. The deal leaves Ms. Reisman in an enviable position: Indigo will have $140-million to $150-million of cash in its coffers from the sale, in addition to the $50-million already on the balance sheet.

As well, a 10-year pact with Kobo ensures Indigo a “meaningful” share of Kobo’s profits on electronic-book sales in Canada.

Now Ms. Reisman must reinvent the book store as consumers increasingly opt for mobile readers over physical books. She’s being forced to branch out ever more into gifts, toys and home decor merchandise, even as competition gets tighter. By 2013, savvy U.S. discounter Target Corp. (TGT-N) will launch its stores in Canada, carrying many of the same types of products.

Book sales, which now make up about 75 per cent of Indigo’s business, will fall to 50 per cent in a couple of years, according to Indigo’s forecast.

Up to this point, Indigo’s investment in Kobo, of which it owns roughly 51 per cent, has been a drain on the retailer. In its second quarter, Indigo’s loss jumped to $40.4-million from $4.6-million a year earlier, squeezed by mounting Kobo expenses and a $25.4-million accounting charge.

To help create her lifestyle merchandise and experiences, Ms. Reisman will pour more money into product development and design at her recently-launched studio in New York. The private-label goods it produces are starting to take off, she said: in the latest quarter, sales of gift and “lifestyle” products rose between 28 per cent and 40 per cent.

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http://www.theglobeandmail.com/glob...er-deal-a-windfall-for-indigo/article2229733/

Tuesday, Nov. 08, 2011

Indigo is Kobo’s controlling shareholder with 51.4 per cent of its outstanding common shares as of July.

In its transformation, the largest bookseller in Canada found that Kobo became a drain as the digital business expanded and its costs grew. In the meantime, many book players, including U.S. giant Borders, have faltered in their efforts to keep up with shifting trends.

“We built Indigo from zero to $800-million,” Ms. Reisman said in an interview. “Now we’ll go through a period when the short-term is challenged on the [earnings] line, but we will move through this transformation and again come out the other end.”

Tokyo-based Rakuten’s agreement to acquire 100 per cent of Kobo’s total issued and outstanding shares will equal a more than 300-per-cent return on Indigo’s investment.

Rakuten will contribute between $140-million and $150-million to Indigo’s balance sheet. Indigo’s current market capitalization is $169.3-million.

“Our objective here is to bring e-reading to more people in more places ... that starts with expanding internationally,” Kobo chief executive officer Michael Serbinis said on a conference call Tuesday. Kobo has a roughly 50-per-cent share of the e-reader market in Canada, he said.

In the U.S., where Kobo faces its toughest battle to compete with e-reading giant Amazon.com and its popular Kindle device, the company’s share is in the “high single to low double digits,” he added. Kobo has also expanded recently in the U.K. and Germany, and is preparing a launch of its device in France.