January 19th, 2003

A few days ago it was reported that the grand merger of Square and Enix was about to collapse because the biggest shareholder of Square did not accept the decided share ratio and wanted changes. Miyamoto said he would vote against the merger in Square's shareholder's meeting in February unless something was done – which would have caused the whole merger to fail.

But now, after the meeting Enix had, they have accepted the new share ratio that all parts of the merger find suitable and the fusion will be happening after all. The situation now is that one share from Square is exchanged into 0.85 of Enix's (it used to be 0.81). Enix's chairman stated that they will not go higher than that. Though making the merger a little bit more beneficial to Square isn't such a big deal economically to Enix, the chairman is also the biggest shareholder, and outs himself to bigger danger in the merger than the other investors, so caution in such major business issues like this is understandable.

Moving from 0.81 to 0.85 might seem like a small figure, but it clearly improves Square's part in the merger; they get 5% more than before, and that is actually hundreds of thousands of Yen. The approximate sum is $883 million, so it clearly makes a difference. People at Square still aren't perfectly happy though. Miyamoto, who was totally against the merger before, has now said that he will accept the merger and will vote for it, but still isn't satisfied with the share ratio. He would have wanted it to be at least 0.87, but after hearing Enix won't go higher than 0.85, he decided to take the offer and settle with that.

The investors from Enix's side aren't too happy either, since the new deal puts Enix into a slightly worse position than before. Enix's share price plunged 3.9% on Tuesday in Tokyo on news of the deal.

The merger will almost positively happen when all the shareholders from Square are ready to vote for it. The current president of the company said that the merger is scheduled to happen on April 1st, the start of the new business year. Many have been sceptical whether or not the merger will actually work in reality, because Enix and Square are completely different types of companies, but both of the presidents have said that they have taken all risks like that into account, and that the merger won't be a problem. Enix has a better economical situation than Square, which is why it seems to be the leading part of the fusion, but Square has more potential with in-house game developing and marketing outside Japan, so both companies will derive advantage from the merger.

Square and Enix (becoming Square Enix in few months) is one of the biggest gaming industry fusions that has ever occurred. They will almost solely rule the Japanese RPG market, and will hopefully be in a position to compete against the biggest gaming industry companies such like Electronic Arts and Infogames.

What effect will the merger have in practise? No such deal has been made in the past, so we can only wait and see. Square has stated that the merger will not affect the development of the games that are in process, and that the Final Fantasy saga will continue as normal. Because Enix has never put in as much effort as Square in producing and programming their games on their own, this can be easily believed, and it's very unlikely that by Enix coming into the picture will change the game development progress inside Square, since most of that is done by Square's own programmer teams.

Source: Gamers

Written by alhana
Proofread by TRZD