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Chapter 601 Acquisition of Sega

At 3:00 PM, YueDong Games' official website updated with a brief but impactful announcement that shook the global gaming industry.

The company will acquire Sega Corporation of Japan for US$10.2 billion in cash and stock...

This announcement, which was only a little over a hundred words long and did not include any explanatory documents or mention any subsequent press conference arrangements, instantly stirred up a huge wave in the global gaming and financial industries.

No one expected that Leap Games would acquire Sega, a former giant in the Japanese game industry, so suddenly, a company that once held a 65% share of the North American 16-bit console market with the Sonic series.

"This is absolutely revenge."

At that time, less than 10 hours before Christmas, an editor named Stanton was preparing to pack up his desk and leave work in a media office building in Midtown Manhattan, New York, to prepare for the wonderful holiday.

The editorial department was instantly thrown into chaos, and the once quiet office area was quickly replaced by the sounds of keyboards clicking, telephones ringing, and conversations.

"They didn't even hold a press conference!" someone said, holding a stack of newly printed Sega financial reports, their voice tinged with grievance. "Releasing them at this time is clearly an attempt to ruin our Christmas celebrations."

This is retaliation against these media outlets for maliciously creating negative public opinion about YueDong Games.

But there's no way around it, everyone has to work overtime.

Because YueDong Games made the announcement, all the users are waiting for the specifics. "F*** it, those capitalists are making all the money, why are they bothering us?"

On the television hanging in the office, a special interview broadcast by MGM CBS caused the editorial department's discontent to completely erupt.

On the screen, Raine Ruiz, CEO of Jump Games, is being interviewed by host Andrew Ross.

"This is not a simple acquisition, but a revolution." Ruiz's voice echoed throughout the office through the TV speakers. "We will integrate Sega's nearly 30 years of accumulated hardware R&D capabilities with Yuedong's global channel advantages and content creation ecosystem to create a truly cross-platform entertainment ecosystem."

Seeing Ruiz's composed demeanor on TV, Stanton gripped his pen tightly.

"This isn't the first time Sega has been put on the market," Ruiz replied in response to the host's question about whether the acquisition was more difficult than expected.

"In January of last year, Sega and Bandai reached a merger agreement, planning to form a joint Sega-Bandai group to compete with Sony. However, with the unexpected popularity of Bandai's electronic pets, the cooperation was immediately terminated."

"That failed merger not only caused Sega to miss the opportunity to integrate animation IP resources, but also exposed its weak position in industry competition."

"Over the past two years, Sega's stock price has fallen by 62%, and its market value has shrunk to less than $30 billion. CSK Group has long been considering withdrawing from the market."

"There have been disagreements in our negotiations, especially in the past two weeks, when YueDong Games' stock price plummeted due to some false information."

"However, the mutual desires of both parties ultimately led to this major merger in the gaming industry."

Everyone immediately thought of the acquisition terms mentioned in the announcement released by YueDong Games. The total acquisition price of $10.2 billion consisted of two parts.

$6 million in cash, plus $4.2 million worth of Leap Games stock.

Through this transaction, Yuedong will acquire 30% of Sega's shares held by CSK Group, becoming its largest shareholder and gaining absolute control.

On the surface, this deal seems like a bargain for YueDong.

Based on Sega's current share price, a 30% stake would be worth approximately $10 billion, while Yuedong's acquisition price would be equivalent to a zero-premium acquisition.

As can be seen from the price set for the stock acquisition of YueDong Games, everyone understands that CSK Group is not losing money at all.

The agreement clearly stipulates that the shares of YueDong used for payment are priced at $300 per share. Compared to YueDong Games' current price of $600, the value of these $4.2 million worth of shares has doubled.

Yuedong acquired control of Sega, making up for its business shortcomings and entering the console business.

Just like when they acquired Sega, CSK Group's purpose was purely investment. Now that they have acquired a stock with more potential than Sega, they are quite satisfied.

"This is a classic win-win structure," Ryan Ruiz said. "Leap gained hardware R&D capabilities at a reasonable cost, while CSK successfully cashed out and held high-growth stock."

"After acquiring Sega, how does YueDong Games plan to operate Sega?" the host asked again.

"First, the Saturn console will be completely discontinued by the end of next year." "Sega's hardware lab in Tokyo will be renamed the Tokyo R&D Center, focusing on the development of next-generation consoles. As for the lab in San Francisco, it may have a new mission."

"Sega's classic games and related titles from Ambition will be released across multiple platforms, giving gamers more choices."

"Finally, YueDong may terminate the Sega-Yamaha collaboration on the -RM project and instead adopt V-disc technology."

"This was obviously pre-recorded; CNBS got the information a long time ago," he said through gritted teeth. "Their staff can go home to be with their families, while we have to be treated like slaves here. Why should we?"

But despite the complaints, the hands didn't stop moving.

From the moment Yuedong Games announced its acquisition of Sega to the end of the CBS interview, only twenty minutes had passed.

Within just twenty minutes, reports about Leap Games' acquisition of Sega appeared on the streaming platforms of major media outlets around the world.

An hour later, various in-depth analysis articles were also published.

The Wall Street Journal's online edition adopted a bold headline: "Dynamic Games Acquires Sega for $10.2 Billion, Potentially Reshaping the Console Market Landscape."

"For YueDong Games, this acquisition fills a key gap in its business portfolio."

"Through Sega, Leap Games was able to establish a foothold in the console business immediately."

"Sega's true treasure trove is not its hardware technology, but its distribution channels covering 120 countries and regions worldwide, and its patent portfolio, with more than 200 core patents in the field of graphics processing alone." "There are also its hardware labs in Tokyo and San Francisco, with more than 500 senior engineers, many of whom were core members who participated in the development of classic consoles such as Mea Rive and Saturn."

"More importantly, Sega also controls the complete supply chain resources for console manufacturing and has maintained cooperative relationships with companies such as Sharp and Toshiba for more than 20 years. The value of these intangible assets far exceeds the acquisition price of US$10.2 billion, and they will all be acquired by YueDong Games."

The Guardian's analysis focuses on the restructuring of the industry.

Columnist Alan Murray points out that this acquisition will break the console market dominance that Sony has enjoyed for the past two years. "With its dynamic resources and content development advantages, coupled with Sega's technological accumulation, it is entirely possible to launch a new generation of consoles around 2000, allowing Sega to return to the trend of a three-way competition with Sony and Nintendo."

The New York Times, on the other hand, interprets the significance of mergers and acquisitions from a global perspective.

"This marks the transition of the gaming industry from regional competition to global integration, providing a new model for cross-cultural integration within the industry."

Unlike the praise from Western media, Japanese media collectively broke down.

The announcement from YueDong Games was released at 4:00 AM in Japan.

Almost all major newspapers have replaced their established headlines.

In a solemn morning news broadcast, the anchor emphasized that "this is the largest cross-border merger and acquisition in the history of the Japanese game industry, a continuation of the Plaza Accord and the US's harvesting of Japan's economic industry."

In print media, the first to launch an attack was the authoritative Japanese game magazine, Famitsu.

The headline prominently read, "The Death of -rm: The End of the Sega Spirit." The article stated, "-rm, as a proprietary storage technology jointly developed by Sega and Yamaha, was the last bargaining chip against Sony's Vita strategy. Leap's abandonment of this technology is tantamount to surrendering to the PS2."

Many people hold this view, including some long-time employees within Sega.

Yoshiaki Morita, head of Saturn's R&D, once told Rein Ruiz, "The R&D investment in the -RM exceeded 300 billion yen, and we had planned to upgrade to 4b capacity in the next generation of consoles. Abandoning this technology means that five years of hard work will go to waste."

"I cannot accept outsiders negating our technological beliefs; all researchers feel the same way."

However, all of these ideas were rejected by Ryan Ruiz: "Consumers need entertainment terminals that are compatible with movie playback, not isolated game consoles."

"In 1997, global sales of V players exceeded 1500 million units, and movie discs sold over 1 million copies. However, -RM was only used in Sega's arcade and console products, resulting in an extremely closed ecosystem. Insisting on outdated technology was irresponsible to players and employees."

Based on reports about Leap Games and Sega, one person was clearly scratched.

In addition to reporting on the acquisition, the Los Angeles Times also took the opportunity to disparage Microsoft and Bill Gates.

"Back then, we even considered collaborating with Sega to develop our own console, the Demon Blade. Why didn't we ever think of acquiring Sega?"

"In this console race, Bill Gates, who got off to a head start, has once again been left behind by Ernst."