Wall Street Journal

Kyle Moran

Dr. Proctor

WSJ-Connection to Class

A brief overview of the article I found from the Wall Street Journal website is involving the merger of two Japan exchanges, the Tokyo Stock Exchange and Osaka Exchange. The consolidation of both exchanges will result in the third largest exchange operator. This deal was heavily pressured by the financial regulators to come to an agreement. This article includes many key elements we’ve discussed in class including various motives for this horizontal integration. If the trading systems are integrated, this would improve the economies of scale and improve both strategic focus and efficiency through the alignment of management. The combined companies will also gain pricing power. With the joining of both, they can expect a larger client base to serve (including the collection of fees, and cost to dispense company information) and further more have control over markets.

Another positive benefit through this merger is diversification through research and development. The article states that “the TSE focuses on share trading while the Osaka exchange operates a derivatives trading platform.” The new exchange will have combined the resources from both exchanges in order to diversify what it will be able to offer to its clients. Their clients should feel rather more comfortable in either form of trading knowing the companies primarily focused in both areas.

Finally, the article says “under the agreement, the TSE will acquire 66.6% of the Osaka exchange via a tender offer.” This was compromised from the OSE, they had a preferred 50.01% stake. The conclusion I could draw from this tender offer is, that it seemed friendly. The TSE president is expected to become the chief of executive of the new company while OSE president is expected to become chief operating officer. So for the release of his share in stake, he was compromised with a high ranking position. Overall, it seems that both parties saw this merger...