According to numerous Japanese news outlets, Japanese toy makers Takara and Tomy are in the final stages of negotiations over a planned merger that would take place next year. The merger of the two companies would create Japan's fourth largest toy and game group, with combined sales of 189.7 billion yen ($1.79 billion).

　　Takara and Tomy are currently Japan's second- and third-largest toy makers, respectively. The two companies also deal with games and interactive adaptations of their intellectual properties.

　　According to the Nikkei Journal, Takara and Tomy plan to create a content-development firm that will explore online distribution of toy-themed software. The two companies will then merge their management under a holding company, or through a stock swap as early as January 2006. Takara and Tomy may officially announce their merger plans later this week.

　　Toy-industry leader Bandai announced on May 2 that it would be merging operations with game maker Namco under a jointly established holding company, Namco Bandai Holdings, on September 29. Their merger will create the second-largest Japanese game and toy company, with combined sales of 458 billion yen ($4.33 billion).

　　"It is true that we have been examining and negotiating [a merger], but no decisions have been made at the current time," commented Takara in a statement released to the press. Tomy's public relations staff also confirmed that the two companies are in merger talks, and also stated that nothing has been decided yet.

　　Last month, Takara lost its capital alliance with Konami, which sold its 22 percent stake in Takara to mobile-content provider Index Corporation for 11 billion yen ($104 million).

　　If Takara and Tomy merge, their combined toy sales are expected to reach about 160 billion yen ($1.51 billion), surpassing that of Namco Bandai Holdings.