Sammy, Sega to Join Operations

Sega Corp., the video game maker famous for Sonic the Hedgehog, and pinball equipment maker Sammy Corp. said Tuesday that they would integrate their operations under a new holding company that would become Japan’s biggest video game software company.

Sega and Tokyo-based Sammy will form the new company by Oct. 1. It will be 72% controlled by current Sammy shareholders, the companies said.

Their combined group annual sales are about $3.89 billion, exceeding those of the current largest Japanese game software firm, Konami Corp.

“By integrating our operations, we will strive to become the world’s No. 1 entertainment company at an earliest time,” said Sammy President Hajime Satomi, who will head the new company.

Shares of Sammy will be exchanged one-for-one for shares in the new company. Sega shareholders will receive 0.28 share for each Sega share. The companies will reorganize their operations by March 2007.

The announcement came as Sega reported its profit tripled for the fiscal year ended March 31 as arcade game sales and cost cutting boosted earnings.

The Tokyo-based company reported group profit of $77 million. Sales dropped inched down 3% to $1.7 billion.

Sega’s sports games did not do well in the United States, a strategically important market, amid tough competition from rivals such as Electronic Arts Inc., it said.