Japan’s bourses to merge in 2013

Tokyo, Osaka bourses’ merger will create world’s No. 3 exchange


TOKYO (AFP) ― Japan’s two main bourses on Tuesday announced a plan to merge their operations in January 2013 as they look to overcome a slow Japanese market in a move that will create Asia’s biggest exchange.

The Tokyo Stock Exchange Group and Osaka Securities Exchange issued a joint statement confirming plans for a “business combination” as they look to respond to strong overseas competition.

The deal follows months of talks amid concerns over Japan’s ability to survive an increasingly competitive landscape, as slowing growth and a strong yen further erode a Japanese stock market that peaked in December 1989.

The benchmark Nikkei index is currently at its lowest levels since March 2009, with stocks slumping in the wake of the March 11 earthquake and tsunami, a record-high yen and eurozone debt fears.

The merged entity, tentatively called “Japan Exchange Group” would be the world’s third-largest bourse behind market leader NYSE Euronext and Nasdaq OMX Group.

The bourses hope that combining the TSE, where most cash stocks including Toyota and Sony are traded in Japan, and the OSE, which is strong in derivatives trading, will save costs and boost Japan’s securities market.

“Tokyo to buy Osaka bourse, creating world’s No. 3 exchangehe presence of Japanese markets have fallen at home and abroad. This is because the markets are not meeting the needs of customers, which are convenience and efficiency in trading,” said OSE President Michio Yoneda.

TSE President Atsushi Saito said: “This integration will improve convenience for market players... and become an important move to lead to the recovery of the Japanese economy.” 

Senior officials at Japanese exchanges have long voiced the need to compete better with regional rivals such as Hong Kong having successfully lured international firms to list.

In a joint statement, the bourses noted that “domestic mergers and cross-border mergers between exchanges have been gathering momentum overseas”.

“For a Japanese stock exchange to survive such global competition as a player, it must establish a highly liquid and efficient market and enhance the convenience of investors and companies through strengthening its competitiveness,” it said.

This would be achieved by “expanding its scale, diversifying the financial instruments in which it deals, and reducing costs,” the statement added.

The deal will see the Tokyo Stock Exchange Group conduct a tender offer for the OSE’s common shares next year, and convert the OSE into its subsidiary, subject to regulatory approvals, the statement said.

The companies agreed to set a purchase price of 480,000 yen ($6,230) per share for the OSE’s common shares. The price represents a 14 percent premium on OSE shares’ closing price Monday of 421,000 yen on the Jasdaq Securities Exchange.

After the transaction, the two entities will merge into a combined holding company, pending shareholder approval.

The TSE’s Saito is expected to become the chief executive of the new company, while OSE’s Yoneda is expected to become chief operating officer.