I was puzzled by the fact that in the Manga Studio 4 EX quick start document, it showed that 2 overlapped balloon merged into one. However, the feature was not documented in the documentation. Luckily some good souls on the Net figured it out and shared it. Here's the excerpt from GreenLaw:
To do this in MS 4 you must first create a new layer by clicking the New Layer button in the Layers window. Make sure you use the New Layer command and not the New Folder Layer command. When the dialog appears, select Text Folder as your layer type, and then click OK. You can then drag your text balloon layers into this folder. When you collapse this folder, overlapping balloons will appear 'merged'.