Tokyo Stock Exchange Group Inc (TSE), operator of Japan’s largest bourse, began a takeover bid that values Osaka Securities Exchange Co at ￥129.6 billion (US$1.68 billion) after the country lost its place as the world’s No. 2 equity market to China.
The TSE, home to Sony Corp and Toyota Motor Corp, is offering ￥480,000 a share for its smaller rival, whose derivatives platform hosts contracts on the Nikkei 225 Stock Average of Tokyo’s largest companies. That is 14 percent more than the last price before trading in Osaka Securities’ shares was halted this morning and 23 percent above the average close since merger talks were announced on March 10. Osaka Securities shares rose 3.2 percent to ￥434,500 after the announcement.
Two decades of slowing growth and recession have reduced the market value of Japanese stocks since the market peaked in December 1989. The country lost its place as the world’s second- largest equity market to China in 2008 and the two have been switching back and forth since. More than US$30 billion in bourse mergers have been proposed worldwide since October last year.
“Unless they can stop the decline of the Japanese stock market, this merger isn’t going to do anything other than buy a bit of time,” said Akio Yoshino, chief economist in Tokyo at Amundi Japan Ltd. “The bid price appears too high at this stage because this merger is happening for reasons other than a company trying to get synergies or increase efficiency or market share. These bourses are merging for survival amid a shrinking market.”
Tokyo will buy between 50 percent and 66.67 percent of Osaka’s outstanding shares.
The merged company, to be tentatively called the Japan Exchange Group, will have four separate businesses operating a cash equity market, a derivatives market, a regulatory unit and a clearing company, according to the bid document. The new structure will result in savings of ￥7 billion a year and will increase revenue by offering new and -improved -services, the release said.
TSE president and chief executive officer Atsushi Saito will be made CEO of the new Tokyo-based company, while Osaka president Michio Yoneda will be chief operating officer.
“With the TSE and Osaka, there’s a significant amount of overlapping and there’s competition that results in a waste of resources,” said Ronald Wan, a Hong Kong-based managing director at China Merchants Securities Co, which oversees about US$1.5 billion. “The merger could create some sort of synergy. Also this has been a global trend for the stock exchange business. They want to achieve economies of scale and stimulate their market share.”