The Tokyo Stock Exchange is making a $1.1 billion offer for its Osaka rival under a plan to join the two markets by January 2013 as global competition between bourse operators intensifies.
The takeover would create the world's No. 3 exchange behind NYSE Euronext and Nasdaq OMX Group Inc., with a portfolio of companies worth more than $3.6 trillion, according to October data from the World Federation of Exchanges.
The Tokyo Stock Exchange Group Inc. said Tuesday it will pay 480,000 yen ($6,239) for each share of Osaka Securities Exchange Co. in a tender offer. The TSE wants to buy between half and two-thirds of OSE's 270,000 issued shares.
The bid represents a 14 percent premium to OSE's closing price Monday.
Japan's bourses are joining forces at a time of increasing competition and consolidation among the world's stock exchanges. Deutsche Boerse and NYSE Euronext are awaiting European Union approval of their merger, which would become the world's largest exchange operator.
The two Japanese companies said in a joint statement the deal would bolster Japan's role as an international financial center and serve as a "step toward the revitalization of the Japanese economy."
"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" by bolstering scale, diversifying services and cutting costs, the companies said.
The two bourses complement each other. The TSE dominates cash equity trading, while the OSE specializes in derivatives.
By integrating trading systems, they estimate savings of 7 billion yen ($90.8 million).
The resulting company will be known as Japan Exchange Group Inc. TSE President Atsushi Saito will serve as the new company's chief executive. OSE President Michio Yoneda will be chief operating officer.
Two decades of lackluster growth have taken their toll on Japanese equity markets. The benchmark Nikkei 225 stock average is off almost 80 percent from its 1989 peak. Trading volumes hit a low for the year in October.
If Tokyo and Osaka remain separate entities, "Japan will lose," Saito said at a press briefing with Yoneda later in the day.
"A merger is in the best interest of Japan," he said.
AP video journalist Koji Ueda contributed to this report.