Legendary Japanese developers Square and Enix are to merge their operations in a deal worth three quarters of a billion Euro, the end result of which will be one of the single largest development companies in the world. The companies claim that the move will help to ward off competition in the games market and ensure long-term survival.
Enix is best known for its Dragon Quest and Star Ocean games, which have a huge following in the Far East, while Square is the creator of the Final Fantasy series and various other RPGs including the Chrono Trigger / Cross games, Xenogears and Parasite Eve. Square also operates the PlayOnline PS2 service in Japan. Aside from the financial implications of the deal, it will also create a pool of original intellectual property second to none within the industry.
The merger came as a surprise to most commentators, although the two companies have collaborated in the recent past. Enix committed itself to developing games for Square’s PlayOnline service, and the companies – along with Japanese publisher/developer Namco – formed a new development studio, Monolith (not to be confused with the US-based FPS developer and engine licensing company), which is working on sequels to Square’s cult classic RPG, Xenogears.
Analysts in Tokyo have welcomed the deal, commenting that it will provide Square with much-needed capital to fund development, while giving Enix a broader base of titles – something which has been a concern for the company in the past, as it has relied on the success of a small number of key franchises to keep it afloat. The new company, Square Enix, will be chaired by current Enix chairman Yasuhio Fukushima, with Square president Wada Youchi moving into the role of president for the merged company. Keiji Honda, currently president of Enix, will be a vice president at the new group.
The new deal comes into effect on April 1st next year, with Enix issuing 48.76 million new shares of its stock to exchange for Square stockst at a 0.81:1 ratio. Square chief operating officer, Tetsu Kayama, believes that the Japanese games industry may see many more consolidations such as this one in the coming months, as companies struggle to meet rising costs of development despite the overall growth in sales for the industry.