Japan's Sega, Bandai Cancel Merger Plans
Tuesday May 27 9:17 AM EDT
Japan's Sega, Bandai Cancel Merger Plans
TOKYO (Reuter) - Sega Enterprises Ltd said Tuesday it had
accepted Bandai Co. Ltd's request to cancel their planned merger,
which would have created Japan's largest game company.
The surprise announcement came only a day before the two firms
were due to approve a merger pact, slated to take effect Oct. 1, and a
day after toymaker Bandai had called a news conference to confirm
it was still on board with the merger.
"Bandai requested a cancellation of the merger and offered a
business alliance instead, which we accepted," a Sega spokeswoman
told Reuters.
Sega, maker of the Sega Saturn 32-bit video-game player, and
Bandai, known for its Power Rangers and virtual pet toy
"Tamagotchi," said in January that they planned a merger to create
a global entertainment giant likened to Walt Disney Co.
The Sega spokeswoman did not give a reason for the break-up, but
speculation had grown prior to the announcement that the merger
could be delayed due to strong opposition from mid-level managers
at Bandai.
On Monday a Bandai executive called a sudden news conference to
say that the company expected its board to approve the merger with
Sega at a meeting Wednesday, withdrawing an earlier plan to
postpone approval until July.
Bandai Managing Director Mikio Ishigami told reporters that
employees at the toymaker were "extremely nervous" about the
change of environment, but that he was confident they would come
on board once the blueprint for the merged company became clear.
Analysts said the cancellation announcement, which came after the
Tokyo stock market closed, would be negative for the two firms,
although they were split over which firm had more to lose from the
failed deal.
Many analysts noted, however, that even if the two firms merged as
planned, business prospects would be shaky as each firm has its own
individual problems.
"Not many had thought that the merger would boost profits in the
future," said Hiroyuki Ono, an analyst at Nomura Research
Institute. He predicted that the merger's cancellation would not
have a detrimental impact on the firms' businesses.
Saturn, Sega's 32-bit video game machine, is losing money and is
unlikely to turn profitable in the future, analysts said.
In December Sega lowered its earnings forecast for the fiscal year
ended March 31 as it liquidated its inventory of 16-bit products and
wrote off accumulated losses at its U.S. unit.
Bandai, for its part, is burdened by extremely weak sales of its Pippin
Atmark machines, a video game player with Internet capabilities.
Bandai has stopped producing the multimedia terminal, although
sales will continue.
Bandai is now profiting, however, from the runaway success of its
"Tamagotchi" virtual pet toy that features an electronic bird. The
toy became an instant hit after its debut in November, with about
five million units already shipped.
Despite brisk sales of the "Tamagotchi," Bandai had to lower its
group earnings forecast for 1996/97 in January.
The two firms are due to announce earnings results on Wednesday
for fiscal year 1996/97. |
