Japan stock exchanges in mega merger

City A.M. Reporter
THE TOKYO Stock Exchange will take over its smaller rival in Osaka in 2013 to create the world’s third biggest bourse, overtaking the London Stock Exchange.

The new bourse will have listed stocks worth $3.6 trillion (£2.3 trillion), giving it the scale to cope with a weak home market and compete with a flurry of global tie-ups.

The Tokyo Stock Exchange’s £1.1bn takeover of the Osaka Securities Exchange brings together two bourses that have operated separately for more than a century with the exception of a brief merger during World War Two.

The Tokyo market controls more than 90 per cent of cash equity trading while Osaka, located in the economic centre of western Japan, draws the top volumes in Nikkei index futures and other derivatives.

“This will create a well balanced exchange,” said Sadakazu Osaki, a senior researcher and exchange expert at Nomura Research Institute.

Globally, exchanges have announced $83bn of mergers and acquisitions over the past five years, rushing to cut costs and diversify in the face of dwindling revenues from the traditional stock trading business and new upstarts.

“The global environment surrounding exchanges has changed dramatically, and the presence of the Japanese markets has been in decline,” said Michio Yoneda, chief executive officer of the OSE, told a briefing. “We are up against a big paradigm shift.”

The two said they would merge operations in January 2013 after the larger but unlisted TSE buys up to two-thirds of the listed Osaka exchange in a public tender offer.

The tentative name for the merged entity is Japan Exchange Group.

The TSE will offer 480,000 yen per share, or a 14 per cent premium to Monday’s closing share price.

The price values the Osaka bourse at 130bn yen (£1.1bn).

Shares in OSE, where companies such as Nintendo and Murata Manufacturing are listed, rose as much as 5.5 per cent before closing up 4.6 per cent at 440,050 yen.