Sega to Acquire Bandai, Creating Toy-Video Giant (Published 1997)

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Sega Enterprises, the Japanese video game maker, said today that it would buy the Bandai Company Ltd., the Japanese toy company famous for the Power Rangers, in a stock swap valued around $1 billion, creating the world's biggest toy and video-game company.

The new company, to be called Sega Bandai, would have about $6 billion in revenue, more than Nintendo, Mattel or Hasbro. Its operations would range from Sega's video arcades, miniature theme parks and home video-game machines to Bandai's Sailor Moon dolls, and its music and video entertainment divisions.

But Sega Bandai would be the product of two troubled companies, both suffering declining sales and profit and increased competition. The move can be seen as part of a consolidation in the world toy and game business. And while mergers like this are somewhat rare in Japan, the presidents of the two companies are considered relatively Western-style managers.

Three years ago, when American children could not get enough of the Power Ranger action figures and Sega was giving Nintendo a run for its money, the presidents of Bandai and Sega dreamed of growing beyond toys and games into multimedia and entertainment, of becoming the next Disney.

But Bandai announced last week that it would lose money this fiscal year, as Power Ranger sales have fallen and its new Pippin machine for browsing the Internet has been disappointing.

Sega is now falling to a weak third in the home video-game business, behind Sony and a resurgent Nintendo, and its earnings are plunging because of write-downs of inventory at Sega of America. So, both companies will try to become an entertainment giant together.