Square Enix threatens hostile bid for Tecmo
Square Enix, the Tokyo video games giant behind the long-running Final Fantasy series,
has launched a Y11 billion (GBP50 million) bid for control of Tecmo in a deal expected to trigger a wave of consolidation in the Japanese games industry.
A merger of Square and Tecmo would unite a company famous for complicated, immersive role-play titles with a smaller rival whose games focus chiefly on ninjas, bare-chested street-fighters and girls in bikinis.
Square said that the proposed deal could turn hostile if the Tecmo board does not accept the offer, adding that the Japanese games industry was now at a critical turning point where consolidation may be the only means of ensuring future growth.
Industry analysts believe that the surprise offer, which follows the unexpected resignation of Tecmo’s president last week, will unleash a bidding war within the polarised Japanese video games sector.
Tecmo’s development team, responsible for some of the most critically acclaimed titles in gaming history, would be attractive to a number of Japanese and overseas businesses looking to boost their pipeline of new games.
Japanese games makers, which used to dominate the global scene but have gradually lost ground to US and European competitors, continue to suffer despite the global popularity of games consoles like Nintendo’s Wii and Sony’s Playstation Portable.
Although a relatively small deal, analysts said that the bid “detonates a time bomb” in the Japanese video games industry which has been struggling to cope with the harsh economics of software development and the expense of picking sides in the hardware industry’s ongoing console war.
The recent arrival of a “next generation” of games consoles has injected a potent measure of competition into the games industry, which is so strong that Nintendo raised its profit forecast by 26 per cent.
Sales of its Wii home console and DS handhelds means that the company now expects profit to rise 60 per cent on last year to Y410 billion yen.
As he announced his company’s offer for Tecmo, Square’s president, Yoichi Wada, admitted that the games industry’s future at the heart of the global games industry was now at risk.
He said: “The scale and growth potential of the games industry is huge but the Japanese games industry is standing at the crossroads, uncertain whether the country can stay at the core of the global industry or not.”
Other Japanese players now expected to enter the fray for Tecmo include Capcom and Konami. Spokespeople for both Capcom and Bandai Namco said that growth by acquisition was “something we are always looking at”.
Square’s president said that he had been in talks with Tecmo since May, but that the negotiations had taken place directly with the president, who resigned suddenly last week.
Mr Wada said that the now rudderless Tecmo was a “concern” and that his bid offered the company its best chance of survival.
Although Square’s offer placed a substantial premium of around 32 per cent on yesterday’s closing share price, Tecmo’s board has not yet agreed to the offer. Industry sources told The Times that Square does not necessarily represent the best merger partner for Tecmo.
Square Enix has made its name as a specialist in huge, complex role-playing games principally aimed at the Japanese market. Tecmo, meanwhile, has a pedigree that includes numerous sports simulations and the Ninja Gaiden series of action adventures.