SoftBank's Yahoo Japan confirmed on Thursday that it is discussing with messaging app firm Line Corp for a potential $27 billion merger that would seek to provide e-commerce and payment options for consumers under SoftBank.
According to Reuters, Yahoo Japan, which is now called Z Holdings, clarified that while talks were underway, a final decision on the possible union has yet to be made. Z Holdings shares have since skyrocketed by 16 percent since SoftBank confirmed the talks.
While Line shares remained untraded on Thursday's opening, some industry experts are optimistic about the potential merger. Insiders also revealed on Wednesday that the union could take place sometime before the end of the month.
For its part in the confirmation, Line explained that it has been looking for strategies to improve its corporate value, but it echoed Z Holdings' statements about the talks not having a conclusion yet.
It is worth noting, though, that if the merger takes place, Line would have a chunk of SoftBank PayPay's 19-million-strong userbase. Line Pay can also have the opportunity to make a name in Japan's fast-rising cashless payments segment.
While Line reported three consecutive quarters of operating losses, Z Holdings has been hard at work in e-commerce and commercial banking explorations. The company announced this week that it secured a 50.1 percent acquisition of fashion online retailer Zozo Inc.
Industry experts noted that while Line and SoftBank have been competing with each other in digital payments and other financial segments, a union could help both firms save on subsidy expenses.
A source briefed on the situation revealed that it was Line that initiated the discussions for a potential merger. The messaging giant's goal is to establish a more solid competitive stance against artificial intelligence (AI) rivals outside Japan.
Aside from AI competitors, some industry analysts noted that Z Holdings may be pressured by the rise of another online retail rival, Rakuten Inc. The competition is pushing SoftBank to be more aggressive in diversifying its business units as well as profit lines.
Meanwhile, a panel under the Japanese government said earlier this week that it will now be firmer with e-commerce businesses under some of the biggest information technology (IT) companies.
According to Nippon, the panel, headed by Prime Minister Shinzo Abe, discussed the possibility of requiring big e-mail operators to disclose their search result ranking processes.
The panel also discussed whether companies like Rakuten, Z Holdings, and even American e-commerce behemoth Amazon, to report on their operational status on a regular basis. If the panel decides to officially request for regular reports from online retailers, Japan's e-commerce sector is expected to see stricter regulations.
