Game machine giant Sega Enterprises Ltd. and Bandai Co., the nation's No. 1 toy company, announced Jan. 23 they will merge on Oct. 1, creating a multimedia entertainment conglomerate with consolidated sales of 600 billion yen.Merging on an equal basis, the new company will be named Sega Bandai Ltd., and be capitalized at 60.949 billion yen, with 0.76 shares of Sega stock applied to every Bandai share. Bandai President Makoto Yamashina will be appointed president of the new firm, and Sega President Hayao Nakayama will become vice chairman in charge of corporate strategies.Isao Okawa, chairman of CSK Corp., a major information service firm that holds 20 percent of Sega's shares, will become Sega Bandai's chairman. CSK will maintain its current shareholding ratio in the new firm, Okawa said. The new firm will have three departments for dealing with game machines, multimedia networking and toys. "Sega is strong in high-tech areas, such as virtual reality and three-dimensional computer graphics, but that is not enough. We can learn a lot from Bandai's marketing and product-planning ability backed by high-quality characters," Sega's Nakayama said in explaining the intention of the merger.Nakayama also said the new firm will be able to obtain a larger group of customers, because while Sega's customers are mainly high school and university students, Bandai's customers are younger. Bandai's Yamashina said the firm chose Sega as a merging partner because he believes an American style of top-down management is essential to survive the intensifying global competition, and he thought Sega was a company that had a president with strong management policy.Sega is struggling in the game machine market against Sony's PlayStation, and Bandai announced earlier this month that it will post consolidated net losses of 9 billion yen instead of its initial 10 billion yen profit projection.