A SoftBank Corp. group firm said Monday it has agreed to merge its subsidiary Yahoo Japan Corp. with messaging app provider Line Corp. by October next year to create the largest online company in Japan to compete with Amazon.com Inc. and other foreign rivals.

By making full use of the combined number of domestic users, exceeding 100 million, Yahoo Japan and Line plan to spend 100 billion yen ($920 million) every year in artificial intelligence and other technologies to offer integrated services from online retailing, advertising and mobile phone services based on their customer data.

"We will become the strongest 'one team'" in the internet industry, Kentaro Kawabe, president of Z Holdings Corp., said at a press conference. The company operates Yahoo Japan.

The merger will place Line under the wing of telecoms and internet conglomerate SoftBank Group Corp., which has been transforming into an investment powerhouse.

The total sales of Yahoo Japan and Line would be the largest among Japanese online business operators, surpassing e-commerce giant Rakuten Inc. Their merger plan will need to pass the scrutiny of antitrust authorities.

Under the deal, SoftBank Corp., the mobile unit of SoftBank Group, and Naver, which owns 73 percent of Line, will make a tender offer to buy the remaining shares, with each spending around 170 billion yen ($1.6 billion). Line will be delisted from the Tokyo Stock Exchange.

Z Holdings plans to make Line a wholly owned subsidiary, while SoftBank and Naver will set up a fifty-fifty joint venture with Z Holdings under its umbrella, they said.

Z Holdings' Kawabe and Line President Takashi Idezawa said they will seek synergy effects by taking advantage of the strengths of each partner. Yahoo Japan has expertise in online shopping operations while Line has a broad customer base for its messaging app services.

Z Holdings posted group sales of 954.7 billion yen in fiscal 2018 through March, while Line had sales of 207.1 billion yen in the business year ended last December.

The merger comes as the two Japanese tech firms are stepping up efforts to catch up with U.S. and Chinese rivals such as Amazon and Alibaba Group Holding Ltd. amid fiercely intensifying competition.

"We have been concerned about global tech giants," Idezawa said, as he feels that Japanese tech firms have lagged far behind their global rivals in terms of scale of sales, profits and market capitalization.

SoftBank Group has also stirred concerns about its investment business since reporting a group operating loss of 704.37 billion yen for the July-September period, hit by the reduced value of its investment in the struggling U.S. operator of shared workspace provider WeWork.

Line has about 186 million active users of its messaging app in Japan, Taiwan and Southeast Asia, while more than 67 million people visit the Yahoo Japan website each month.

==Kyodo

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