The Japan Fair Trade Commission or JFTC, approved Wednesday the merger between Japanese bourse operators Tokyo Stock Exchange Group, Inc. and Osaka Securities Exchange Co. Ltd. (OSCUF). The approval was effected through the issuance of a "Notification To The Effect That a Cease and Desist Order Will Not Be Issued" by the JFTC.
A combination of TSE, which controls more than 90 percent of cash-equity trading volume in Japan, and the OSE, with strength in derivatives trading, is expected to boost the global competitiveness of Japan's securities market.
Privately-held Tokyo Stock Exchange or TSE, and Osaka Securities Exchange or OSE, agreed in November 2011 to merge in January 2013 to create the world's second-largest bourse in terms of market capitalization.
The JFTC began the review process in early January 2012 following a notification filed by the two companies.
Following the approval of the JFTC, TSE Group will now promptly commence a takeover bid for OSE shares, and will subsequently conclude a merger agreement after seeking approval at their respective general shareholders meetings.
According to the terms, TSE will first convert the OSE, a listed company, into a subsidiary through a public tender offer, by buying up to 66.67 percent of its outstanding shares at 480,000 yen per share or $6,250 per share.
As a second step, the two companies will go ahead with an absorption-type merger whereby the OSE will be the surviving company and the TSEG will be the absorbed company. TSE shareholders will receive 0.2019 OSE share for each TSE share they own based on the merger ratio terms.
The move would create a holding entity and four subsidiaries, each specializing in cash products, futures trading, settlement and self-regulation. The surviving combined holding entity will tentatively be called Japan Exchange Group, Inc., which will control divisions of the TSE and the OSE as subsidiaries.
Following the completion of the merger, expected on January 1, 2013, TSE President and CEO Atsushi Saito will serve as the CEO of the combined holding entity, while OSE President and CEO Michio Yoneda will become chief operating officer.
The two stock exchanges had commenced merger talks in March amid weak market conditions and a wave of consolidation among global exchange. However, they were not able to reach a decision on the merger ratio as well as determine the corporate value of the unlisted TSE at that time.
OSCUF last traded at $5,601.79 on June 29.
by RTT Staff Writer
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