Aliso Viejo-based Internet retailer Buy.com Inc. finally has found a home, with a Japanese parent.
In May, Buy.com said it’s being acquired for $250 million by Rakuten Inc., Japan’s largest Internet company.
The move is part of a global expansion by Rakuten, which runs an online mall plus auction, bookstore, Internet search, travel and stock trading sites.
Rakuten counts some 50 million registered users and sees yearly sales of about $3.2 billion.
“The partnership with Rakuten, given our global aspirations and their dominance in Japan, makes for a great fit,” Chief Executive Neel Grover said. “The deal keeps all our employees here and it’s a foundation for us to grow.”
Buy.com is set to keep its management and South County operations, which have about 135 workers.
The company sees some $500 million in yearly sales and has been profitable for the past three years, according to Grover.
It has about 12 million registered accounts for its U.S. website.
Buy.com sells everything from flat TVs to diamond rings, some 60 million products in all. The company’s latest forays into new areas include pet supplies, toys, musical instruments, health and beauty products and used books.
Staples include electronics, movies, music and computer products. About 35,000 independent merchants also use Buy.com to sell their products.
The company competes tooth and nail—largely on price—with Amazon.com Inc., Barnes & Noble Inc. and Best Buy Co.
Global Push
Last year, Buy.com launched websites for shoppers in Canada, France, Germany, Italy, Spain and Britain.
The sites have customized product details in local languages and currencies. Local warehouses allow for speedier delivery.
When it came down to buyout discussions, there was some debate among Buy.com’s higher-ups about whether the timing was right, Grover said.
“I think everyone expected to wait longer and not do a deal now,” he said. “Given the interest we received, we ultimately decide that to reach our goals now is as good of a time as any to transfer the ownership.”
Negotiations moved swiftly, Grover said. They involved a handful of potential buyers, including a few “relatively large brick and mortar retailers,” he said.
Grover declined to go into specifics.
“It was a very exciting process until the board voted,” he said. “I didn’t know which company we were ultimately going to go with. It was definitely an exciting finish.”
The deal brings an end to the funky history of an independent Buy.com.
The company got its start in 1997, when it listed 30,000 tech items. Its business plan was to sell products at a loss and make up the difference with online advertising.
In 1999, a group led by Japan’s Softbank Corp. paid $165 million for a stake in Buy.com.
Founder and Orange County native Scott Blum took Buy.com public in 2000 and took it private once again in 2001 amid the dot-com crash.
In 2005, Buy.com was a step away from going public again, but couldn’t drum up enough investor interest to pull off an offering.
It originally sought to raise $86 million, scaled it back to $33 million and then pulling out altogether.
In 2005, the company made a foray into social media, acquiring Meetails.com, a website founded by a trio of Harvard University graduates that sought to combine social networking and shopping.
Buy.com changed Meetail’s name to Yub.com (that’s “Buy” spelled backward) and tried to incorporate social networking and shopping. The site still is running but hasn’t shown much activity since late 2005.
Blum left the company in 2006 and Grover took over as chief executive. Blum still is believed to be an investor.
In 2008, New York-based private equity firm Clearlake Capital Group LLC bought a 9% stake in the company.
Buy.com’s managers and shareholders were “very pleased” with the outcome of the deal, according to Grover.
Rakuten Draw
With Buy.com, Rakuten gets an immediate foothold and brand name in the U.S.
In 2005, the Tokyo-based company paid $425 million for New York’s LinkShare Corp., which runs an affiliate marketing program for generating online advertising.
Buy.com and Rakuten have a lot in common, according to Grover.
Both sell directly to consumers as well as allow independent merchants to sell on their websites. Both are big on user-friendly design for buyers and sellers. The two also have similar company cultures.
“The biggest thing is how they treat their employees,” Grover said. “We both show a lot of respect and appreciation for our employees—we both bring in lunch everyday and try to foster a fun, hip and really hard-working environment.”
Rakuten does it on a much bigger scale, of course, with some 6,000 workers.
“We thought the two cultures had a lot of similarities and it would make for an easier transition,” he said.
