Rakuten Buys OverDrive for $410 Million (More Than it Paid for Kobo)
I have long been expecting that OverDrive, the dominant player in the library ebook market, would one day be acquired by a bigger fish who wanted to secure control of a market, and today that finally happened.
Rakuten and OverDrive announced on Tuesday that the latter had been acquired by the former for $410 million. The deal is expected to close in April this year, after which OverDrive will continue to operate as a wholly owned subsidiary.
OverDrive is a leading player in the library ebook market, and it distributes audiobooks, ebooks, music, and video to over 30,000 libraries and schools around the world. It also counts a number of retailers among its customers, including Waterstones (which sells Kindles in store but also has its own ebookstore).
Rakuten is a $5 billion a year Japanese conglomerate with a presence in a dozen retail markets as well as a solid core business in the financial services industry. OverDrive is the third digital publishing company Rakuten has acquired in the past 4 years, and perhaps the 8th or 9th media company (this is important, trust me).
Rakuten bought Canada-based Kobo in late 2011 for $315 million, and followed that up a short while later with the purchase of Aquafadas, a French company which offers a platform for building and distributing apps and Epub3 ebooks (it also builds said platforms under contract for other companies, including one for Kobo).
Yes, OverDrive is selling today for more than the asking price of Kobo 3 and a half years ago. This can be explained by the fact that Kobo was sold before the bubble burst, and also because OverDrive is profitable (Kobo was and still is a money pit).
Rakuten hasn’t shared many financial details from OverDrive, but they did say at the press conference earlier today that OverDrive generated an EBITA of $25 million in 2014. There’s no info yet on annual revenues, but Rakuten did say that they expect the acquisition will push its ebook division into the black in 2015.
The purchase will likely also have a positive synergy with Rakuten’s other media companies. It’s a little too early to predict exactly how it will play out, but I expect that OverDrive’s experience with distributing audiobooks, music, and video will also prove useful.
So is anyone surprised by today’s news? I’m not.
I’ve been expecting this deal since July 2013, only with a slight difference: I thought Amazon, and not Rakuten, would buy OverDrive. In fact, when OverDrive had that Kindle ebook snafu last month I wondered whether that snafu was actually an Amazon negotiating tactic. It really could have been, but there’s no way to tell for sure.