Yahoo! Japan Set To Acquire Ikyu.com In A Bid To Strengthen Its Online Travel Business

+29.36%
Upside
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Market
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YAHOY: Yahoo Japan Corp ADR logo
YAHOY
Yahoo Japan Corp ADR

Yahoo! Japan Corporation (OTC:YAHOY) has been facing intense competition in the e-commerce industry from incumbents Amazon and Rakuten. [1] It has been expanding its footprint in Yahoo’s online industry by introducing some novel ideas such, as no listing fee for its auction and a shopping site for sellers to counter the popularity of its competitors. Additionally, in a bid to boost its topline, it is strengthening its presence in the online travel domain through organic and inorganic expansion.

In a recent move, Yahoo! Japan has agreed to buy Ikyu Corp. for 100 billion yen ($828 million), its biggest-ever deal to bolster its online travel and dining businesses. [2] In this note, we discuss the trends in Japan’s online travel industry and Yahoo! Japan’s expected deal with Ikyu.com.

See our complete analysis of Yahoo! JAPAN here

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Japanese Online Travel Industry

According to Phocuswright, Japan is APAC’s largest online travel market and the world’s third-largest travel market overall. However, at $81 billion, it is the second largest travel market in APAC. [3] OTA sales are expected to increase further in 2020, when Japan hosts the summer Olympics and Paralympics.

In addition to these factors, a shift to mobile channel is a critical driving factor of online travel sales in Japan, as more consumers adopt mobile payments and are moving towards booking their trips via mobile devices such as smartphones and tablets.

Yahoo! Japan And Ikyu Deal

Yahoo Japan is offering a 42% premium (3,433 yen per share) to Tuesday’s closing price of Ikyu shares. A tender offer for Ikyu shares will be made from December 16 to February 3, Yahoo! Japan said.

Ikyu.com will not only allow Yahoo Japan to cover a broader range of online travel but also bolster its restaurant reservation services since only a small percentage of reservations are made through an online platform.

Yahoo Japan has been operating its own Yahoo! Travel service since 1997, and the company revamped this service in February. This acquisition will give it a ready and popular platform to deploy its service in the expanding inbound online travel market. At present, we have a $8.29 price estimate for Yahoo! Japan, which is inline with the current market price.

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Notes:
  1. Most popular online retailers in Japan in May 2015, based on number of unique visitors (in millions), www.statista.com []
  2. Yahoo Japan offers to buy travel site Ikyu for $828 million, December 15 2015, www.reuters.com []
  3. Japan Online Travel Overview Eighth Edition: Inbound on the Rebound, September 2015, www.phocuswright.com)) Phocuswright also estimates that the Japanese travel is set to reach $92.4 billion by 2017, cementing Japan’s position as Asia Pacific’s second-biggest travel market. The report further states that the travel industry is set to grow due to a shift in booking to online travel agencies (OTAs) and expansion of low cost carriers (LCCs). Furthermore, the OTAs’ share in the travel industry will continue to increase at supplier expense primarily through gains in online lodging. ((Japan’s travel industry shows modest growth, October 30 2015 []