Sega and Sammy announce merger plans

Two of Japan's biggest gaming companies are to become one, with onetime platform holder Sega announcing its intention to merge with gambling machine maker and game publisher Sammy Corp.

The merger, which will take effect from October 1st, will allow Sega to benefit from the financial success enjoyed by Sammy thanks to its "pachinko" (a hugely popular gambling arcade game) business in Japan, and will give Sammy significantly more clout in its efforts to become a major player in the games industry.

Sega has had an extremely difficult year financially, mostly due to the failure of its US operation to compete effectively against EA in the sports game arena. Sales of Sega Sports titles, particularly key ones such as its NFL game, have fallen a long way short of projections despite heavy promotion.

At the same time as announcing the merger, Sega also slashed its profit forecast for the 02/03 financial year by 90 per cent to just 500 million yen (€3.8 million) - although this drastic downward revision will not surprise many, as the news of the company's US difficulties became known some months ago.

The merger will create a company with a market value of around €2.2 billion, of which Sega will make up about 54 per cent. However, it's likely that Sammy will call many of the shots in the new company, as its strong finances are a key reason for this merger.

Although Sammy is a hugely successful company in the Japanese gambling arcade market, its efforts in the games arena have been less high profile. However, the company has recently enjoyed significant success with the Guilty Gear series of beat 'em up titles. The acquisition of Sega's strong brand recognition will no doubt boost Sammy's ability to develop and sell titles both in Japan and in the West.

This merger marks the second major consolidation in the Japanese games market in the last few months. Recently a merger between RPG development giants Square (Final Fantasy) and Enix (Dragon Quest, Star Ocean) was approved after a dissenting major shareholder at Square withdrew his objection to the plans.