Tokyo Stock Exchange Group Inc.’s tender for its Osaka rival ended Wednesday, with Skagen A/S and Westchester Capital Management Inc. agreeing to sell stakes in the smaller bourse as Japan seeks to boost its role as a financial hub.
Norway’s Skagen, which manages about $15 billion in equities, tendered its 3,300 shares, according to the firm’s portfolio manager, Kristian Falnes. U.S.-based Westchester, which manages $5 billion, tendered about 4,500 shares, according to its director of research.
The ¥480,000-a-share tender closed at 3:30 p.m., and the results were to be announced Thursday, according to the TSE. Shares on the Osaka Securities Exchange rose 0.9 percent to ¥442,500 Wednesday after closing at their lowest level this year Tuesday.
Merging the two biggest stock venues is the first step in a government plan for creating a “comprehensive” exchange handling equities, commodities and other securities as the nation seeks to re-establish itself as a financial center. While regulators have scuttled more than $30 billion in global exchange mergers since 2010, the Fair Trade Commission approved the deal July 5.
“We had a higher target and we are not happy with the offer price,” said Skagen’s Falnes, who still chose to tender the shares. “We had hoped for much higher earnings growth for Osaka than we have seen in the past few years. We found better opportunities elsewhere.”
TSE needs at least 50 percent of the 270,000 outstanding OSE shares to proceed. Trading volume in the stock was 90 percent below the five-day average Wednesday, according to data compiled by Bloomberg. OSE spokesman Masahiro Yada declined comment on the bid. TSE spokesman Ryo Takahashi also wouldn’t comment.
The OSE dominates Japan’s growing futures and options markets, while the TSE hosts the world’s No. 3 cash equities venue by the value of companies listed. OSE Co.’s shares haven’t risen above the offer price since the bid was announced.
Profit at the Osaka bourse sank 40 percent to ¥5.47 billion for the year that ended March 31, as participant fees, listing fees and trading volume for derivatives declined. The TSE, which also saw a decline in its participant and listing fees, said its full-year profit dropped 29 percent to ¥6.3 billion.
“We did tender our shares,” said Robert Lynch, a New York-based director of research at Westchester Capital. “Given the level we had bought it at and the return we were going to realize, it was a reasonable exit for us. There was a case for improved terms, but ultimately we decided to accept it. I think there will be some that will hold out but they’ll probably be able to get the 50 percent.”
Jupiter Asset Management Ltd., which owns about 1.1 percent of OSE Co., said July 26 that shareholders deserve a higher price because it is more profitable than TSE Group. JO Hambro Capital Management Ltd., the third-largest shareholder, won’t tender its 5.1 percent stake because it wants to own a piece of the merged exchange, Nudgem Richyal, a Singapore-based portfolio manager at JO Hambro, said July 10.