Sega, Sammy Call Off Merger

The merger, which was announced just three months ago, quickly ran into problems as investors panned the idea and analysts around the world cast a skeptical eye on the plan. It was ulimately Sega that called off the merger talks, after the two companies failed to agree on merger details. The decision allows Sega to re-open talks with Namco about a possible merger. Last month Namco made an aggressive attempt to derail the Sega-Sammy merger by taking its Sega merger offer to the public, and went so far as to say that Sega should be the surviving entity in such a merger. The timing of today's announcement may indicate that Sega is serious about Namco: May 9 was the deadline that Namco gave Sega to respond to its merger proposal. Today Sega's shares fell 33 yen, or 5 percent, on the news. Sammy's stock climbed 4 percent to 2,560 yen. Both shares were suspended from trading in the Tokyo Stock Exchange in the morning. In a related announcement, Sega increased estimates for the fiscal year that ended in March, saying that better-than-expected games sales boosted its group net profit to about 3 billion yen ($25.4 million) -- significantly higher than the 500-million-yen profit estimate it last provided.