Sega close to announcing merger with Sammy Corp.

Ailing computer game maker Sega Corp. is in final talks over a merger with Sammy Corp., which produces games similar to “pachinko,” after turning down an offer to link up with video game maker Namco Ltd., according to sources close to the discussions.

The sources said Sega and Sammy could announce a deal after the results of an audit of Sammy’s assets, expected to be completed this week, becomes available.

Sega, which has been struggling due to a slump in its game software sales, had been looking for a merger either with Sammy or Namco. Sammy produces a hybrid pachinko machine known as “pachi-suro.”

CSK Corp., the largest Sega stockholder, favors Sammy as the merger partner as it reportedly has a stronger financial standing.

Sources said Sega and Sammy have yet to work out a formula for evaluating the assets of the two companies and negotiations could still hit a snag.

Some senior executives at Sega are known to oppose a merger with Sammy, questioning the compatibility of the nature of the two companies’ businesses.

CSK announced Feb. 13 that it would pursue a merger between Sega and Sammy but the plan was at one point thrown into doubt following a sharp fall in Sega’s share prices.

Namco, which had expressed interest in Sega, joined the fray on April 17 with a proposal for a merger.

On Thursday, Namco urged Sega to make a decision on its proposal by May 9.

CSK has apparently decided on the merger with Sammy after the losses at Sega, which closed its books in March, became clear in late April.

A merger between Sega and Sammy would lead to the creation of a diversified entertainment business, with stakes in arcade game machines, game software, pachi-suro game machines and pachinko machines.