UBS has agreed to acquire rival Credit Suisse for $3.25 billion following the bank’s troubles last week.
The Swiss authorities have changed the country’s regulation to avoid shareholder vote as they rushed to announce the deal over the weekend.
Under the terms of the transaction which is expected to close by the end of the year, UBS will assume up to $5.4 billion in losses.
According to Financial Times’ sources, the Swiss National Bank has also agreed to offer $100 billion in liquidity to UBS.
UBS Chairman Colm Kelleher said:
This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.
Acquiring Credit Suisse’s capabilities in wealth, asset management and Swiss universal banking will augment UBS’s strategy of growing its capital-light businesses. The transaction will bring benefits to clients and create long-term sustainable value for our investors.
UBS benefited from the deal by agreeing to pay only CHF 0.76 per share of its own stock to acquire the rival bank, which is much lower than Credit Suisse’s Friday closing share price of CHF 1.86.
Once the takeover deal is completed, the combined UBS and Credit Suisse entity will have over $5 trillion in total invested assets, and UBS will become the largest wealth manager. The investment banking unit will account for approximately 25% of the combined entity’s risk-weighted assets.
Kelleher will serve as the Chairman of the merged entity, while Ralph Hamers, UBS’ current CEO, will assume the role of Group CEO.
UBS Chief Executive Officer Ralph Hamers added:
Bringing UBS and Credit Suisse together will build on UBS’s strengths and further enhance our ability to serve our clients globally and deepen our best-in-class capabilities. The combination supports our growth ambitions in the Americas and Asia while adding scale to our business in Europe, and we look forward to welcoming our new clients and colleagues across the world in the coming weeks.”
On Thursday last week, Credit Suisse confirmed its decision to borrow CHF 50 billion from the Swiss National Bank (SNB) to prevent liquidity issues and ease investor fears after the lender’s shares continued to fall.
