November 25, 2002 - Japanese RPG giants Square and Enix announced today (11/26, Tokyo) a merger which will see the two companies operate as one starting April 1, 2003, the start of the next business term. The resulting company will be known (at least for the time being -- see below) as Square Enix. The deal is reportedly worth 93.2 billion yen (US$764 million) in cash and stock.
On the business side of things, current Enix chairman Yasuhiro Fukushima will serve as the chairman of the company with current Square president Wada Youchi assuming the new president role. Current Enix president Keiji Honda will be the vice president with Square's Hisashi Suzuki serving as a special director to the firm. The firm's main office will find itself in Enix's current main office in Tokyo's Shibuya ward. As a consequence of the stock swap involved in the merger, Enix shareholders will own 55% of the new company.
Square Enix aims for group sales of 80 billion yen, an operating profit of 27 billion yen, and a net profit of 15 billion yen for the fiscal year ending March 2005, according to Dow Jones. For comparison, in the fiscal year ending March 2002, Enix and Square combined posted group sales of slightly more than 60 billion yen, with Enix posting a net profit of 4.3 billion yen and Square taking a loss of 16.5 billion yen.
Game development and releases from the merged entity and the individual companies will be unaffected for the time being. Titles currently set for release will be released as planned, meaning Square's Final Fantasy X-2 and Enix's Star Ocean 3, both likely to sell in the millions, should see Japanese release in March of next year. The current system of software development at both companies will continue unaffected until March of 2005 as the new company goes through a consolidation stage.
Additionally, moving on to a topic that's sure to be spinning in the mind of Japanese gamers, the companies have stated that there hasn't been any thought at this point of linking the Dragon Quest and Final Fantasy franchises. Note that this is just the official word. We're certain that someone, somewhere in the Square development studios and the Enix accounting department has realized that such a game would set the island nation on fire.
The purpose of the merger, according to statements released by the companies, is to fight off the threat of heightened development costs and competition from foreign developers and to increase development power and earnings. Taken together, the two companies will certainly form the dominant force in Japanese role playing market, with Enix having sold 2.75 million games in Japan last year and Square 4.37 million, mostly through RPGs. The Enix connection brings in ties with well known Japanese RPG development houses such as tri-Ace and Chun Soft, with the Square connection bringing with it the foreign presence Enix has always lacked.
At a press conference today, the new management staff shared some thoughts on the merger. "This is an offensive merger," commented Wada. "The merger decision was made in order to further please game players, and in order to survive. Enix is an excellent company. Square has also fully recovered, meaning this merger is occurring at a time when both companies are at their height."
Wada continued, "Additionally, both companies serve as ideal complements to one-another. We may have big titles such as Dragon Quest and Final Fantasy, but their styles are different and they are viewed differently by users. Additionally, our companies supplement each other in overseas development and in the development of our differing Online strategies. Making the best use of this complimentary relationship, we'd like to develop new digital content."
Honda also chimed in, stating "As the game industry sees great changes, we'd like to unite Square's development talents and Enix's external resources to produce games that will make gamers throughout the world take note. From long ago, Wada and I were considering the idea that if our two companies worked together, we'd be able to produce something very interesting. I'd like to produce games that people think are out of this world."
During a Q&A; session following the press conference, it was revealed that the new Square Enix name may not be final. The choice of names was an obvious one based on the brand strength associated with the two companies, but the decision on keeping this name or changing it to another will be made in the future and will, according to Wada, be based in part on the opinions of game players.
Representatives of both Enix of America and Square Electronic arts had no comment regarding how the merger would affect the existing American operations of both companies. Any possible restructuring on that end likely has yet to be worked out, although we expect to learn more on the subject after the turn of the year.
Another press conference, scheduled for the 29th, promises to offer solid details new company's strategy (and hopefully solid details on the name as well). Stay tuned.