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Sega shares dive on EA denial
TOKYO, Japan (Reuters) -- Shares in Japanese game software maker Sega Corp dived on Monday after it poured cold water on a media report it was set to tie up with U.S. peer Electronic Arts Inc. A report in the Asian Wall Street Journal that both Microsoft Corp and EA were considering stepping in as "white knights" to bid for the troubled Japanese firm had sent its stock surging by 15 percent on Friday. Speculation of a U.S. tie-up was further fuelled by a Saturday report in Japan's Nihon Keizai business daily quoting insiders as saying that EA, the largest U.S. software house, is considering purchasing CSK Corp's 22 percent stake in Sega. But Sega said on Monday that it had received no formal approach from EA. Microsoft, EA and Sega had already denied the Wall Street Journal report. "We have not received any formal proposal on a capital alliance and no such issue has been discussed at our board meetings or chief executives meetings," the company said in a statement. Sega's shares were down about 6 percent at 696 yen near the close after falling as low as 666 yen. "Shares in Sega have been volatile as most of the trading is by speculative traders," said BNP Paribas analyst Takeshi Tajima. The reports that Sega is looking for new partners had cast doubt on a planned merger with Sammy Corp, Japan's largest maker of pinball-style 'pachinko' game machines, which has already got a thumbs-down from investors. Shares in both companies have hit lifetime lows in recent sessions. Sammy mergerThe Sega-Sammy merger, set for an October closing, has been widely seen as a takeover of Sega by Sammy. Even though Sega, at the time the deal was announced, accounted for 54 percent of their potential combined market value of $2.4 billion, Sammy is seen as financially stronger. "Sega will try to proceed with the merger plan with Sammy, but it is likely to remain open to other talks to find better deals or even to draw better merger terms from Sammy," said Takashi Oka, an analyst at UFJ Tsubasa. Analysts said they would be surprised if EA launched a bid for CSK's stake in Sega because it would weaken the U.S. company's financial health. CSK, an information service provider, is Sega's top shareholder. Sega, creator of videogame character Sonic the Hedgehog, posted its fifth consecutive annual net loss in 2001-02 and is due to redeem 50 billion yen ($423 million) in convertible bonds in June 2004. "All EA wants would be Sega's development teams which make games that EA does not...such as 'Virtua Fighter' or the 'Sonic' series. But such a partial purchase would not be possible unless Sega is desperate," Oka said. Some analysts say an ideal scenario would be if Sammy bought Sega's arcade game operations with Microsoft taking Sega's consumer game software operations, but they question whether Sega's employees would accept such morale-sapping deals. A Sega spokesman said the firm would keep working on its merger talks with Sammy as a priority and aims to set up a joint committee by the both companies to decide details of the merger by the end of this month. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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