The Tokyo Stock Exchange and the Osaka Securities Exchange Co. will aim for a merger deal by autumn, but differences between Japan’s two main bourses still threaten to scupper any agreement, sources familiar with the situation said.
A merger may be achieved either through a share swap or through a tender offer bid by the closely held Tokyo bourse to buy its rival, the sources told Reuters.
A TSE spokesman said the exchange had not made any decision regarding the talks.
An OSE spokesman said: “We haven’t announced any talks with the TSE, so we can’t comment.”
Talks so far have failed to produce an agreement because the Tokyo exchange has insisted that it must list its own shares before proceeding with any merger. Not doing so could, it says, open it up to criticism that it was attempting a back-door listing without meeting its own criteria for public offerings.
The Osaka bourse is eager to combine operations sooner as the two Japanese exchanges look for ways to fend of competition from foreign rivals.
The president of the OSE told Reuters last month that merger talks with the TSE beyond June would be difficult unless the Tokyo exchange altered its stance.
Talks between the two Japanese exchanges started in March amid a flurry of proposed mergers and alliances among global exchanges, with Deutsche Boerse revealing a deal to acquire NYSE Euronext and create an industry giant.
Singapore Exchange proposed a union with Australia’s ASX , while the London Stock Exchange mulled combining operations with Canada’s TMX Group .
Those marriages, however, have faced some opposition. Resistance from regulators in Australia was strong enough to end the Singapore Exchange’s $8.3-billion U.S. bid for ASX.
While it is unlikely that authorities would question a deal between the two Japanese bourses, the disagreement over the TSE’s plan to list beforehand still presents a major obstacle to a pact.
The TSE controls more than 90 per cent of cash-equity trading volume in Japan, with the combined market value of stocks traded on the exchange exceeding ¥300-trillion ($3.7-trillion). The OSE is the top player in Nikkei futures and other derivatives.
Shares of OSE rose 1.2 per cent to ¥394,500 on Wednesday, giving it a market value of more than $1.3-billion.