Plans to create Japan’s largest games company through the merger of Sega Enterprises Ltd and Bandai Co Ltd, forged at the beginning of the year (CI No 3,085) are all off. The two had planned to announce approval of the merger pact today, but instead Bandai asked Sega to cancel the deal. Bandai requested a cancellation of the merger and offered a business alliance instead, which we accepted, Sega told Reuters. No reasons for the breakup were given, but it was though to be strongly opposed by some factors within Bandai itself. The merger was to have taken effect on October 1, with Bandai looking as if it would be dissolved into Sega. Both firms have been struggling with their most recent games systems, with Sega failing so far to make its 32-bit video games machines profitable, and Bandai in even worse problems with its Internet-enabled Pippin Atmark. Bandai, however, has struck gold with its Tamagotchi virtual pets, selling five million units since the launch last November. The new combination was to have created a $5bn company, and a $425m profit for the year 1997-98. The separate performances of the two can be judged tomorrow, as both companies are set to report for the fiscal 1996/7 year. Both companies have recently lowered their earnings forecasts.
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