Mizuho in Talks to Buy 20% Stake in Rakuten Securities, Sources Say

Mizuho Financial Group Inc. is in talks to acquire about a 20% stake in Rakuten Group Inc.’s securities arm through its brokerage unit, people with knowledge of the matter said.

The purchase price for the stake in Rakuten Securities Inc. could total about 80 billion yen ($554 million), the people said, asking not to be identified because the information is private. The Nikkei newspaper reported the discussions earlier, saying to an agreement could come by the end of the week.

Japan’s biggest banks have been struggling to build scale in their online securities businesses and compete with industry leaders like SBI Holdings Inc. and Rakuten. Sumitomo Mitsui Financial Group Inc. in June agreed to take a 10% stake in SBI, the country’s largest online brokerage.

Mizuho and Rakuten are in talks for various alliance opportunities, including investment in Rakuten Securities, but nothing has been decided, the bank said in a statement. A Rakuten Group spokesman made similar remarks.

Hiroshi Mikitani’s Rakuten said in May that it’s preparing a listing for its securities unit as the e-commerce giant diversifies its business. It’s not clear what Mizuho’s stake purchase would mean for the initial public offering, which hasn’t been scheduled.

Conditions for IPOs have deteriorated this year as investors get spooked by a global stock market slump. Rakuten is also planning to list its banking unit, and chose Goldman Sachs Group Inc. and Daiwa Securities Group Inc. as lead managers for the offering last month.

Rakuten has struggled since it made a big push into Japan’s saturated mobile market to compete with NTT Docomo Inc., KDDI Corp. and SoftBank Corp. The group’s quarterly operating loss widened from a year ago, and S&P Global Ratings last month gave it a negative credit outlook, citing cash pressures.

For Japanese banks, digital channels are seen as critical to attract retail clients, especially younger generations. Sumitomo Mitsui’s alliance with SBI will focus on providing online financial services for individuals including younger and mass-affluent customers, Tokyo-based SBI said.