TOKYO — Demaecan, a Japanese food delivery company backed by messaging app Line, on Monday said it will raise 80 billion yen ($726 million) in a move likely to intensify the cash-burning battle with its key rival Uber.

South Korea’s Naver plans to invest 18 billion yen for an 8.3% stake in Demaecan, adding to a stake it already owns through a vehicle called Mirai Fund. Z Holdings, the parent company of Line and an affiliate of SoftBank Group, plans to invest 31.7 billion yen to maintain its 38.3% stake. Demaecan aims to raise the remaining amount from overseas investors.

The structure is based on Demaecan’s stock price of 1,725 yen on Friday, and the final figure can change based on the issue price, which will be finalized later this week. J.P. Morgan is acting as the bookrunner and lead underwriter.

Of the proceeds, 65 billion yen will be used on marketing, while 10 billion yen will go to research and development, and 5 billion yen to boost the number of delivery staff by February 2024. The company is targeting gross merchandise value — the total value of orders made through the app — of 340 billion yen in the financial year ending August 2023.

“It is essential to take further measures to expand market share and implement growth investment in order to be in a position to lead the consolidation in the domestic food delivery industry that is expected in the future,” the company said.

Founded in 1999, Demaecan was a pioneer in Japan’s food delivery industry but has come under intense competition from Uber’s food delivery app Uber Eats in recent years. Industry observers have said Demaecan lost ground to Uber partly because it has been unable to deliver orders quickly.

Demaecan received a cash infusion from Line last year and reshuffled its management. The company reported a net loss of 14.7 billion yen for the nine-month period ended in May 2021, widening from 1.9 billion yen a year earlier. Revenue grew 171% to 18.5 billion yen.

The latest fundraising move comes as food delivery grows in popularity in Japan during the COVID-19 pandemic. Uber Eats has been expanding fast, building a network of about 100,000 delivery staff in Japan and about 100,000 restaurants and other merchants.

Raj Beri, Uber’s vice president of grocery and new verticals, recently told Nikkei Asia that it plans to boost its offerings of grocery, alcohol and items delivered from convenience stores.

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