Amusement equipment maker Sega Enterprises Ltd., and toymaker Bandai Co. announced Thursday that they will merge in October to form a "global" entertainment company.

The merger will help Sega, Japan's largest manufacturer of video game hardware and commercial-use amusement equipment, keep a firm foothold in the game hardware business, where it has been under heavy pressure.

Both companies have suffered disappointing sales of key products as competition for electronic games heats up.

Bandai, responsible for the recent Power Rangers boom, is strong in character toys, and has been trying to expand into computer game software and movie distribution.

Sega's Saturn home video game player and Bandai's Pippin game system both are not selling as well as expected, but officials said the new company will not abandon either home game system.

A Sega statement said the new company aims to combine the strengths of both companies and will be divided into three major sections: amusement, multimedia and entertainment. But it offered no further details of the business plan.

Analysts say the new company is likely to be a tough competitor in the global video game market for the industry's other leaders, Nintendo Co. and Sony Corp.

Bandai's ability to appeal to younger children, for instance, could help Sega find new customers for the Saturn, while Bandai will get access to Sega's proprietary video game software and hardware standards.

The merged company, Sega Bandai Ltd., is expected to post annual group sales exceeding 600 billion yen (5.04 billion dollars) the statement said.

The companies said the merger ratio would be 1.0/.76, meaning that 0.76 share of Sega will be worth 1.00 share of Bandai. Sega Bandai Ltd. will be capitalized at 60.95 billion yen (512.19 million dollars), with overall assets worth 588.65 billion yen ( 4.95 dollars).

Source: Associated Press