Namco withdraws Sega merger offer

A second merger deal has fallen through for Sega, with Namco withdrawing its merger proposal today after Sega said that it could not give a specific answer to the proposals yet.

Yesterday, merger plans with gambling machine maker Sammy Corp were shelved, ostensibly because the two companies failed to agree on mutually acceptable terms for the deal. Relations between the two had steadily worsened since Sega made clear that it was also considering other deals despite formally announcing plans to merge with Sammy several months ago.

Following the collapse of the Sammy deal, it had been widely expected that today would see Sega responding positively to Namco’s approaches; however, the withdrawal of the proposal indicates that negotiations have fallen apart, and Sega has stated that it has ended merger talks.

Namco’s statement on the matter leaves the door open, saying that it will consider a merger again should Sega propose one; however, Sega has stated publicly that it will not pursue this option.

Sega’s outright spurning of two potential merger partners – one of whom, Namco, had stated that it wouldn’t even object to a deal which saw Sega acquiring it – can be read in two ways. Firstly, a deal with Microsoft or, more likely, Electronic Arts, may be in advanced stages of negotiation – sufficiently advanced that Sega is now closing down its other options.

Any EA deal is likely to take the form of a capital and commercial partnership between the companies, while a Microsoft deal would almost certainly see the Redmond-based giant acquiring a major stake in Sega. Sega is unlikely to favour such a deal, since it would lock it into developing exclusively for the Xbox.

The second possibility is that Sega has simply decided that it is not actually interested in pursuing a merger plan of any description at this point in time. Although combining its operations with a more financially secure company would certainly provide much-needed stability at Sega, the fact is that the company is certainly not in dire enough straits to actually desperately need a merger right now.

The one other theory which is floating around is entirely unsubstantiated and comes from left field, but is interesting nonetheless, and involves Capcom – whose financial advisers recently told the company that a merger with another game company would be highly advisable in the light of its recent financial results. This leaves a pool of companies in Japan who have indicated their willingness to merge; Namco, Sammy, Capcom, and possibly Sega. Someone call Cilla Black – a game of corporate Blind Date is on the cards.