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Japanese game makers plan combination, Sega to buy Bandai

January 23, 1997

TOKYO (AP) _ Sega Enterprises Ltd. is buying Bandai Co., the maker of Power Rangers action figures, in a $1.09 billion deal that will unite two of Japan’s best-known game and toy companies.

The combined company, to be formed Oct. 1 and called Sega Bandai Ltd., will be a stronger competitor, better able to seek out opportunities for growth, according to today’s announcement of the deal.

Both companies have been hurt in recent years by disappointing sales and stiff competition.

Industry analysts said the deal will help Sega, Japan’s largest manufacturer of video game hardware, keep a firm foothold in the game business, where its profit margins have been under heavy pressure.

In addition, Bandai, which is best known for the Power Rangers boom of the early 1990s, will be able to pursue more opportunities in multimedia, like computer game software and movie distribution.

``The merger will allow a new stage of growth for the companies,″ said Yoshinori Tanahashi, an analyst at Nomura Research Institute, an affiliate of Nomura Securities.

Both companies could also benefit from their ability to draw on a larger pool of toy and game characters for marketing purposes and for use in software products.

Under the terms of the deal, 0.76 Sega share would be exchanged for each Bandai share.

The merger announcement followed both companies’ recent disclosure that their earnings would be weaker than expected.

Last month, Sega slashed its group net profit forecast for the year ending March 31 to 5.3 billion yen ($44.54 million) from its previous projection of 10 billion yen ($84.04 million), citing a writedown of older, slower home video game machines at its battered Sega of America Inc. subsidiary.

Sega’s newest Saturn model performed only modestly in the United States during Christmas, struggling against Nintendo’s more powerful game machine and Sony’s Playstation.

Earlier this month, Bandai reversed its group earnings forecast for the year ending March 31 to a pretax loss of 2 billion yen ($16.81 million) from a profit of 22 billion yen ($184.87 million). It cited slack demand for its ``Pippin Atmark″ multimedia set-top box, developed with Apple Computer Inc., and slowing overseas sales of the Power Ranger figure toys.

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