To be more exact, Sega tried to merge with Bandai (this was prior to the Bandai Namco merger). The reason being that both companies were in dire straights at the time and were looking to bail each other out (Sega was neck deep in the Saturn quagmire, while Bandai had tried to get into video games via the Wonderswan and the Altmark model of the Apple Pippin, only for both to flop massively, which cost the company a lot of money). As a result, both were hoping to combine into a bigger, stronger company. Both CEOs discussed and agreed to the deal, and both boards actually okayed the deal. However, there was a massive, for lack of a better word, full on REVOLT by Bandai's middle management over the deal. The reasons for this were threefold.
First, Bandai's middle management didn't want Sega's CEO Hayao Nakayama to run the combined company, which was the initial plan. They realized he was running Sega into the ground and they didn't want him to take Bandai down as well.
Second, Sega and Bandai had very different management styles. Bandai is very much a traditional Japanese corporation in terms of how its managed. Sega, however, had a more freewheeling American style of management (Sega actually started as an American startup out of Hawaii and was owned by the American CSK corporation for a number of years). Bandai's managers were very happy with their Japanese way of doing things and didn't run to run their company according to Sega's more American ways.
Third, and while last, certainly not least, by the time the deal was agreed upon, Bandai didn't
need to merge Sega anymore. By that time, Bandai had released the Tamagotchi, which went on to become a runaway success and effectively saved the company. Sega needed the merger far more than Bandai at this point, so the deal just no longer made economic sense for Bandai to pursue.
So, the deal was cancelled, and both CEOs who had initially agreed to it walked the plank shortly afterward.
Funnily enough, not long after that deal went down, Nintendo bought stock in Bandai themselves, which was reported all over the industry and big news at the time (see
here,
here, and
here for just some examples of the reporting), and this sparked wild speculation that this stock buy was just a prelude to Nintendo making a go for acquiring the company. Makoto Yamashina, the ex-CEO of Bandai who was the one to try to get the merger between Bandai and Sega through, only to resign when that failed, actually came out against Nintendo acquiring Bandai (he was still a major shareholder at the time). I think he was just butt hurt because his attempt to force a merger failed. However, and this is the interesting part, Nintendo never sold that stockholding, and continued to maintain it, even after the Bandai-Namco merger. To this very day, Nintendo is still one of Bandai Namco's largest shareholders, making a takeover by Sony of the latter unlikely, while increasing the chances of a takeover by the former. Nintendo also own Stock in Square Enix, Koei Tecmo, Konami, and Kadokawa. The only major Japanese video game company they own no stock in is Sega.
