Japanese Giant Rakuten In £120m McLaren Talks

By Mark Kleinman, City Editor

The Japanese owner of Play.com is in talks to take over the title sponsorship of the McLaren Formula One (F1) team, one of the most prestigious naming rights deals in global sport.

Sky News has learnt that Rakuten, Japan's biggest internet retailer, is in advanced discussions with the British motor racing outfit about paying roughly £40m annually over the next three years as it builds global awareness of its growing business empire.

The talks have been going on for some time, and Rakuten is understood to have seen off competition from an unidentified drinks brand to move into pole position to secure an agreement.

However, a person familiar with the talks said there was no certainty that they would be concluded successfully.

It is also unclear how Rakuten and McLaren would choose to brand the team for the remainder of the 2014 season, which continues with the Bahrain Grand Prix this weekend.

Rakuten's name is little-known in the UK but an international acquisition spree in recent years has brought some of the most prominent brands in global e-commerce under its ownership.

Three years ago, the company acquired Play.com in the UK for about £25m.

In January last year, Rakuten shut the retail operations of the online business following the closure in 2011 of a VAT loophole by the Government which had allowed it to avoid charging VAT on entertainment products such as CDs and DVDs.

In February, the Japanese group bought Viber, the messaging app, for $900m (£540m), providing Rakuten with its first foothold in the rapidly growing mobile messaging market.

Viber has more than 300m registered users and operates in nearly 200 countries.

Hiroshi Mikitani, Rakuten's chairman and chief executive, said when the deal was struck:

"Viber understands how people actually want to engage and have built the only service that truly delivers on all fronts. This makes Viber the ideal total consumer engagement platform for Rakuten."

The Japanese group's other interests include Buy.com, France's Priceminister, Kobo, a Canadian rival to Amazon's Kindle e–reader, and Wuaki.tv, a Spanish film streaming service recently launched in the UK and backed by an endorsement from the former high jumper Dick Fosbury.

Rakuten, which also sponsors the annual Japan Open ATP tennis event,  announced this week that it would cease sales of whale meat amid continuing international condemnation of trade in the product.

Its Japanese provenance will suit McLaren given that the team's engines will be supplied by Honda from next year.

McLaren has historically commanded one of the biggest price-tags in the F1 paddock for its title sponsorship, but the value of the latest deal, if completed, is likely to surprise some in the sport given that last year saw its worst on-track performance for decades.

Vodafone was the team's principal commercial partner for several years but ended their alliance at the end of 2013.

Ron Dennis, the group chief executive of McLaren who has resumed his role as the F1 team principal, said recently that he was holding out for a richly-priced title sponsorship deal.

"Inevitably when you have a run of poor results people try to push the rate card down and I won't accept that.

"I know what this company is and I know what this Grand Prix team can achieve, and that requires the correct recognition when it comes to a commercial relationship with a principal sponsor.

"We are negotiating with several companies at the moment and I'm optimistic it will happen sooner rather than later.

"But part of being the size that we are, money is an issue. The racing team — which doesn't have to worry about income — has the biggest budget that it has had in the history of the company."

The £40m annual cost of the deal also indicates that the value of F1's sponsorship rights is not being hurt by the continuing debate about aspects of the sport, including the noise levels emitted by the racing cars' engines this year.

A McLaren spokesman declined to comment while Rakuten could not be reached for comment.

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