NEWS - Thursday, February 13, 2003
Sega To Merge With SammyTOKYO (Reuters) - Japan's Sega Corp., suffering after sports video games flopped in the U.S., said on Thursday it would merge with 'pachinko' game machine maker Sammy Corp. and it cut its 2002/03 profit forecast by 90 percent. The merger, scheduled for October, means that Sega, Japan's largest game arcade operator and creator of videogame character Sonic the Hedgehog, has abandoned plans to restructure on its own and has turned for help to financially sound Sammy, Japan's largest maker of pachinko pinball-style machines. The deal will create a firm with a combined market value of $2.4 billion, with Sega accounting for around 54 percent. "By combining Sammy's high growth power in pachinko game systems and Sega's strength in software development and in the arcade business, we can create a globally known, comprehensive entertainment firm," Sammy President Hajime Satomi, who will lead the new entity, told a news conference. Satomi played down concerns that Sega's weak balance sheet would hurt Sammy's healthy financial base. "Sega is suffering from losses in consumer game software and overseas operations, but the overseas business has been in large part restructured and videogame operations should be able to generate a profit with Sega's high technological skills," he said. The two firms were leaning toward an outright merger, he said, without specifying which would be the remaining entity. They will also consider a scheme to merge under a holding firm, with a decision possible as early as March, he added. "We want Sega President Hideki Sato to remain one of the core management members after the integration," Satomi said. Analysts said the merger move was not surprising, given the recent fortunes of the two firms.