Game Gallery Amusements

May 2 (Bloomberg) -- Bandai Co., creator of ``The Power Rangers,'' agreed to buy ``Pac-Man'' designer Namco Ltd. for about 175.3 billion yen ($1.7 billion) in cash and stock to create Japan's second-biggest toy and video-game software maker.
Bandai purchased 6.3 percent of Namco for 10.5 billion yen in cash, according to a joint statement released today. Namco shareholders will then receive 1 share each in a new combined company per Namco share, valuing their stock at 1,597.5 yen a share, about 14 percent higher than April 28's close.
The merged company will have more funds to develop video games for the $20 billion global market, matching increased spending by larger rival Sega Sammy Holdings Inc., formed in a merger seven months ago, and U.S. companies such as Microsoft Corp. A wider range of characters will also help the new company spur sales of toys, arcade games and cell-phone downloads.
``It's positive because they can complement each other's weakness,'' said Ryoji Nagaoka, an equity strategist at SMBC Friend Securities Co. ``Bandai has abundant characters but is behind in terms of technology. Namco has graphic technology to develop games for game centers but has no outstanding characters apart from Pac-Man.''
The Tokyo-based companies will combine Sept. 29 under the name Namco Bandai Holdings Inc., which will be led by Bandai President Takeo Takasu and Namco Vice Chairman Kyushiro Takagi. Bandai, which also owns characters such as ``Digimon'' and ``Mobile Suit Gundam,'' and Namco, which makes the ``Tekken'' martial arts fighting series, will meet the press at 4 p.m.
Market `Maturity'
Bandai shares fell 2.5 percent to 2,335 yen as of 2:27 p.m. in Tokyo, after dropping as much as 3.8 percent. Namco shares rose 8.8 percent to 1,530 yen, headed for their biggest gain since November 2003. The companies' shares were suspended for the first one and a half hours of trading, following an earlier report of the merger plan by the Nihon Keizai newspaper.
Japan's stock markets were shut Friday for a public holiday.
Bandai gets more than half of its sales from plastic models, trading cards, and other toys and hobby products, and about a fifth of revenue from video games software and stand-up video games consoles used in arcades.
Namco, which competes with Sega in Japan's amusement center market, gets more than 60 percent of its revenue from arcade machines and earnings from running its own game centers. Sales of video game software, which it makes for consoles developed by Nintendo Co., Sony Corp. and Microsoft, account for about a quarter of sales.
Failed Mergers
``Merging is one way of surviving in an industry that is very much nearing maturity, especially in Japan where the birth rate is low,'' said Yuuki Sakurai, who helps manage the equivalent of $4.7 billion of Japanese equities at Fukoku Mutual Life Insurance Co. ``It's unclear whether this merger will remain positive for the companies in the medium to long-term'' because of the ``difficult'' business environment.
Past merger attempts in the industry have failed. Sega and Bandai scrapped a plan to combine in 1997, citing differences in corporate cultures and product lines, while Namco pulled out of a merger proposal with Sega in May 2003.
Revenue at 17 global video game publishers fell 3 percent from a year earlier to $24.5 billion in fiscal 2004, DFC Intelligence, a San Diego-based market researcher, said on its Web site. Sony, Nintendo, Electronic Arts Inc. and Microsoft were the top four game software makers, DFC Intelligence said.
The cost for making video game is rising, as faster chips and high-definition graphics require developers to add more detail. Making a video game ``is getting to be more and more like making a movie,'' Microsoft's J Allard, a corporate vice president who helps run the company's Xbox unit, said in an interview in January.