Sammy Becomes SEGA's Largest Shareholder

[Lazy8s]

Sammy buys 22% of Sega from CSK, may raise stake

TOKYO, Dec 8 (Reuters) - Japan's Sammy Corp (6426.T) paid 45 billion yen ($418 million) to acquire a 22.4 percent stake in video game publisher Sega Corp (7964.T) on Monday in what could be the first step in taking a controlling share.

Sammy said it may acquire more shares in Sega and may eventually make the game publisher a subsidiary, half a year after merger talks between them broke down due to disagreements over management style and other terms of the integration.

It offered no details on how it plans to do so.

"We did not stop talking because we fought or anything like that," Sammy Chief Executive Hajime Satomi told a news conference. "We still lack killer contents and Sega's history and library of software will help us a great deal."

Sammy bought 39.1 million shares from CSK (9737.T) , a leading information services firm, at 1,158 yen per share, or a 13 percent premium on Monday's closing price of 1,025 yen.

Sammy said it financed the latest share acquisition through bank borrowing.

The new stake will be added to the 100,000 Sega shares, or 0.06 percent of shares outstanding, it acquired in 1999. It is now the biggest shareholder in Sega.

Tokyo-based Sega has shifted its focus to software development in consumer games since pulling the plug on its loss-making Dreamcast game console in 2001, but it has failed to attract a wide range of global consumers.

"Up until now, we have continuously cooperated and worked with Sammy and both companies will work together in the future to ensure Sega's growth," Sega President Hisao Oguchi said in a news release.

Sega has developed a new pachinko game machine, using its trademark video game character "Sonic the Hedgehog".

Sammy said it holds a 31 percent market share for pachinko slot games and a three percent share for traditional pachinko game machines.

"It's the same argument for Sammy, I think, as before when it actually wanted some character-based content to build up its own portfolio products," said Hiroshi Kamide, an analyst at KBC Securities Japan.
Garish pachinko parlours are ubiquitous in Japan, filled with devotees watching as tiny metal balls whirl around the upright pinball machines.

Players can win or lose money but the government defines it as a form of entertainment not gambling.

CSK, an information services company, said it would post a 17 billion yen extraordinary profit from the share sale.

Shares in Sammy closed down 1.63 percent on Monday at 3,610 yen while CSK shares fell five percent to 3,790 yen. The announcement came after the stock market had closed. ($1=107.73 yen)

http://www.reuters.com/newsArticle.jhtml?type=financeConews&storyID=3953598&pageNumber=0

Of all SEGA's options for partnering, I believe this makes the most sense. The desire to remain independent had them considering full integration through a buyout or merger with another company only as a last resort, yet the suitors expressing interest in collaborating by just buying a share of SEGA (EA, Microsoft) called for fundamental changes to their publishing strategy. To SEGA's business operations, Sammy provided the most synergy (distribution of amusement machines and operation of amusement centers) with the least redundancy (less overlap than there was with Namco), but there was some reservation internally over an outright merger with Sammy for various business and corporate cultural reasons. This new deal allows SEGA to continue to operate themselves while collaborating closely in a partnership upon which both companies can build their strengths and complement each other's needs.

 

[passerby]

Gamesindustry suggests that a takeover may be planned. But that is of course speculation at this point.

Sammy buys huge stake in Sega; takeover on the cards
Rob Fahey 14:23 08/12/2003

Dramatic twist to the Sega-Sammy merger saga sees Sammy planning a buy out

Gambling arcade giant Sammy has announced that it is to buy a 22.4 per cent stake in Sega from the company's one-time parent company, CSK, and has hinted that it may make Sega into a subsidiary in the future.

The purchase, which is being made for some 45.33 billion Yen (€346 million), makes Sammy into Sega's largest shareholder, and follows the collapse of merger talks between the two companies last May.

Then, Sega said that the two companies "lacked synergies" and considered a merger approach from Namco instead - and then apparently decided that it didn't need a merger partner after all, allegedly also rejecting business proposals from Microsoft and Electronic Arts in the process.

That very public fiasco saw then Sega president Hideki Sato and COO Tetsu Kamaya stepping down from their roles at the company, while Sammy fumed over the nature of its rejection by Sega - with one senior executive quoted as saying that Sega had "betrayed and embarrassed us".

It's now clear that while Sega may have lost interest in merging with Sammy, Sammy did not drop the idea - and its enormous investment in Sega stock today proves just how serious it is about acquiring one of the world's largest and best-known publishers.

"In the future, we may take an additional stake in Sega," Sammy president and CEO Hajime Satomi told a press briefing on the acquisition. "We won't rule out the possibility of making [Sega] a subsidiary." Satomi is expected to take a seat on the Sega board at the earliest opportunity.

So where does this leave Sega's management, who rejected Sammy's merger overtures so publicly last spring? According to Satomi, talks with the company's senior management were "positive" and he described himself as "confident that we will be able to cooperate in a friendly manner," while Sega itself released a statement announcing that the two companies had agreed to work together for the benefit of Sega's future business development.

Sammy, whose main business is the manufacture of Pachinko gambling machines for the Japanese market, has been attempting to build up its presence in the videogame market for some time, and has seen some success with franchises such as the Guilty Gear series of beat 'em ups. It's expected that even if Sammy completes a take over of Sega by acquiring further stock in the company, which seems eminently likely, the Sega brand will be retained as the company's videogame and arcade machine brandname.

 

[Sonic]

This news isn't completely surprising in the slightest. It's sad, but not surprising. Sammy may intend to sort out SEGA's management problems and get the company back on track as far as future growth is concerned. What else wouldn't be surprising is a massive exodus of SEGA talent and employees to start new development teams or join existing ones. It's bound to happen. Some from within the company may wish to buy up more SEGA stock in the puiblic and help offset the Sammy "takeover."

It might be time to start looking for future employment.

 

[bbot]

Sammy ONLY paid $418 million to acquire all the shares of Sega stock that CSK had? Wow. Just imagine if MS paid that much for a piece of Sega instead of of forking out $375 million for buying out Rare? All that money would not have been wasted on a largely useless acquisition (Rare hasn't done anything yet but develop a lackluster title, Grabbed by the Ghoulies).

 

[Evil_Cloud]

This news isn't completely surprising in the slightest. It's sad, but not surprising. Sammy may intend to sort out SEGA's management problems and get the company back on track as far as future growth is concerned. What else wouldn't be surprising is a massive exodus of SEGA talent and employees to start new development teams or join existing ones. It's bound to happen. Some from within the company may wish to buy up more SEGA stock in the puiblic and help offset the Sammy "takeover."

It might be time to start looking for future employment.

Sammy might as well use Sega Europe to expand it's business in Europe. Unless they want to set up individual Music and film publishing companies/companies. (Yes, Sammy wants to go 'all media' )

 

[bbot]

Sammy president will advise Sega to focus on arcades and less on consoles.

http://www.gamespot.com/all/news/news_6085379.html

Is it time for a large console game publisher to step in and pick up defecting studios?

 

[Qroach]

OUCH! What does sommy know about the console biz? they haven't produced anything in ages. I think Sega would have been better off going to MS.

 

[London Geezer]

OUCH! What does sommy know about the console biz? they haven't produced anything in ages. I think Sega would have been better off going to MS.

Sammy's Guilty Gear X2 was in my opinion one, if not THE best fighting game i've played this generation, from graphics to gameplay to the sheer size of the game. Call me old-fashined...

 

[Simon F]

OUCH! What does sommy know about the console biz? they haven't produced anything in ages.

The question is.. what do you know about Sammy?

 

[bbot]

I guess this means Sega will likely no longer be a home console game publisher and strictly focus on making coin-op arcade games.

 

[maskrider]

I guess this means Sega will likely no longer be a home console game publisher and strictly focus on making coin-op arcade games.

SEGA has always been profitable in the arcade business, while the home console is not performing really well. Focusing more on arcade will only make SEGA healthier and that should be a good thing to SEGA fans.

And indeed, many good SEGA console games are ports from arcade games.

 

[Silanda]

I guess this means Sega will likely no longer be a home console game publisher and strictly focus on making coin-op arcade games.

SEGA has always been profitable in the arcade business, while the home console is not performing really well. Focusing more on arcade will only make SEGA healthier and that should be a good thing to SEGA fans.

And indeed, many good SEGA console games are ports from arcade games.

I don't agree. Many of Sega's great series over the years have been console only. I don't see how abandoning the console market for the relatively unhealthy arcade market will bring Sega any more success. I don't see how the arcade market is big enough to be a primary focus anymore, even companies such as Capcom have pulled out of it. If it was ten years ago it might have worked, but the arcades have been dying for some time now.

 

[maskrider]

I guess this means Sega will likely no longer be a home console game publisher and strictly focus on making coin-op arcade games.

SEGA has always been profitable in the arcade business, while the home console is not performing really well. Focusing more on arcade will only make SEGA healthier and that should be a good thing to SEGA fans.

And indeed, many good SEGA console games are ports from arcade games.

I don't agree. Many of Sega's great series over the years have been console only. I don't see how abandoning the console market for the relatively unhealthy arcade market will bring Sega any more success. I don't see how the arcade market is big enough to be a primary focus anymore, even companies such as Capcom have pulled out of it. If it was ten years ago it might have worked, but the arcades have been dying for some time now.

May be for somewhere else, not for Japan. Japan is still the main country of focus for SEGA (and Sammy).

Well, I'd like to know which console only (not ports from Arcade) series sells good enough ? Sonic ? Shemune ?

IMHO, there are just too many SEGA games that didn't sell. And SEGA fans are not helping by actually buying many of them.

And BTW, there is even a press release of their UFO catcher (not even a Video game) in the arcades being profitable.

 

[Silanda]

Sega have a lot of old properties which they have failed to exploit (eg Streets of Rage) on the consoles, and if the management had been a little smarter they could have ressurrected them before now. The problem I see with focusing on arcades is, how many arcade games do Sega release? It can't be that many. They may be profitable, but they will take a cut in revenue if they go arcade only, and surely they will lose staff and developers. Also, from the reports posted it seems like Sammy just want Sega to push their hardware to other markets outside of Japan. I am just sceptical about the strength of the arcade market outside of Japan. As a long time Sega fan I'm worried that they will eventually become just a name on UFO catcher and pachinko machines.

 

[maskrider]

Sega have a lot of old properties which they have failed to exploit (eg Streets of Rage) on the consoles, and if the management had been a little smarter they could have ressurrected them before now. The problem I see with focusing on arcades is, how many arcade games do Sega release? It can't be that many. They may be profitable, but they will take a cut in revenue if they go arcade only, and surely they will lose staff and developers. Also, from the reports posted it seems like Sammy just want Sega to push their hardware to other markets outside of Japan. I am just sceptical about the strength of the arcade market outside of Japan. As a long time Sega fan I'm worried that they will eventually become just a name on UFO catcher and pachinko machines.

I would think this is a process of selection, dump the non-profitable/low potential series and focus on the profitables/high potential series than going arcade alone.

SEGA has more stuffs than arcade and UFO catcher, pachinko is not the only thing that Sammy has, Sammy also publish console games, and I think the games from Sammy are pretty good so far.

I don't understand why people are upset about the take over. And treat that like the end of SEGA. SEGA has been losing money for quite a long time already. Sammy makes money.

 

[Sonic]

This isn't so bad I guess. It's very possible that SEGA comes out the better company in the end. Sammy can sort out management at SEGA and make better business decisions. Internally what the word is is that console games will still be developed and sold but there will be more strategic decision making of which games to develop. This means that SEGA may focus on properties that have recgonition and mass appeal. This can be seen as a bad thing as it can be seen that innovation will be taken away. Sammy insists that creative freedom will still be abound, but would like to see more bread and butter games come out. It also seems like they want to strengthen the arcade market across the globe and have home console ports that would resemble old school SEGA. I'll have more information by the end of the week.

 

[Evil_Cloud]

Sega have a lot of old properties which they have failed to exploit (eg Streets of Rage) on the consoles, and if the management had been a little smarter they could have ressurrected them before now. The problem I see with focusing on arcades is, how many arcade games do Sega release? It can't be that many. They may be profitable, but they will take a cut in revenue if they go arcade only, and surely they will lose staff and developers. Also, from the reports posted it seems like Sammy just want Sega to push their hardware to other markets outside of Japan. I am just sceptical about the strength of the arcade market outside of Japan. As a long time Sega fan I'm worried that they will eventually become just a name on UFO catcher and pachinko machines.

They had a Streets of Rage 4 in development for Dreamcast... looked totally ass.

 

[function]

They had a Streets of Rage 4 in development for Dreamcast... looked totally ass.

It only ever got as far as a rough pre-rendered video meant to show the concept to higher ups. The video was never meant to be seen by the public, and the game wasn't ever up and running on the DC.

But yeah, the quality of the CG did look less than great.

 

[Qroach]

Simon F,

The question is.. what do you know about Sammy?

That's just the point. I don't know much about them anymore. However anyone that thinks there's more money to be made of the shrinking and dying arcade market, compared to console games, is in my bad books

 

[Tagrineth]

All I know about Sammy, is that Guilty Gear X2 is one of the best games ever made, period, and would be the all-around best 'traditional 1v1 fighter' ever if Soul Calibur 2 didn't exist.