Koei will hold three quarters of the newly combined publisher, and 20 billion yen ($207 million) in stock will be infused into the holding company during the merger.

The two companies recently had tough times, as they faced various problems in the form of development problems and employee lawsuits, among other things.

Tecmo Koei is aiming for a profit of 16 billion yen ($164 million) in its fiscal year 2011. In comparison, the two companies added up to a combined profit of 8.5 billion yen ($87 million) last year.

A Tecmo statement translated by Kotaku reads that both Koei and Tecmo “have excellent financial positions, strengths and the ability to take advantage of each other in order to improve profitability and solidy the foundation of a worldwide leader.”

Square Enix has disclosed that it will not pursue the Tecmo proposal any further due to the rejection.

Tecmo has until September 4 to respond to the offer, which will see Square purchase a controlling stake in the company at a 30% premium over current stock prices. Square Enix has disclosed that it will not continue to pursue its takeover of Tecmo if the offer is rejected, unlike a certain other publisher whose name starts with *cough*E*cough*.