* Merger to come as early as autumn 2012
* Deal agreed after months of talks on details
* TSE to first take up to two thirds of OSE via pubic offer
* OSE would remain listed
* Combination would be 3rd largest bourse by value of listed cos
By Noriyuki Hirata
TOKYO, Nov 19 (Reuters) - The Tokyo Stock Exchange (TSE) and Osaka Securities Exchange Co Ltd (OSE) have made a final decision to merge their operations and create the world’s third-largest securities bourse, a source with knowledge of the talks said.
The two have decided to combine forces as early as autumn 2012 and as late as the spring of 2013, and will make an official announcement after board meetings on Tuesday, the source said.
The source was not authorised to speak on the record ahead of the announcement.
The final decision to merge was made in a meeting between TSE chief Atsushi Saito and OSE head Michio Yoneda after months of tough negotiations over the merger ratio and the method of carrying out the integration, the source said.
Merger talks had started in March with the aim of better competing amid weak stock market conditions in Japan and a wave of mergers and alliances among global exchanges.
Under the plan, the unlisted Tokyo bourse will first take a stake of up to a two-thirds in the smaller but listed Osaka exchange as early as next spring through a public tender offer, the source said.
The two would then merge operations and the Osaka exchange would remain listed as the surviving entity, the source said.
A combined OSE and TSE would be the world’s third-largest bourse with a market value of listed stocks totalling $3.6 trillion as of the end of October. That trails only NYSE Euronext at $12 trillion and Nasdaq OMX Group Inc at nearly $4 trillion, according to the World Federation of Exchanges.
The two have complementary strengths, with the TSE controlling more than 90 percent of cash equity trading volume in Japan and the OSE ranking as top player in Nikkei index futures and other derivatives.
The TSE’s market value will be set at 1.7 times that of the Osaka bourse, which was 111.6 billion yen ($1.5 billion) as of Friday’s close, the source said.