UBS acquires Credit Suisse in landmark bailout deal

  • UBS is offering to pay up to $2 billion to buy Credit Suisse, the Financial Times reported.
  • UBS was in talks over the weekend about buying all or part of its struggling Swiss rival.
  • Credit Suisse felt the offer was too low, Bloomberg reported.

UBS will buy Credit Suisse, the Swiss National Bank announced on Sunday afternoon.

Earlier on Sunday, UBS offered to pay more than $2 billion to rescue its struggling Swiss rival – after initially offering half, the Financial Times reported on Sunday. But we didn’t know what the final price would be.

The Swiss National Bank said in a statement on Sunday afternoon that the takeover was made possible thanks to the support of the Swiss federal government and the Swiss Financial Market Supervisory Authority FINMA.

Swiss regulators are planning emergency regulatory changes to avoid a shareholder vote on the deal to speed up the process before markets open on Monday, the report said.

The all-stock deal is expected to be signed by Sunday evening and would value Credit Suisse’s equity at well below Friday’s closing value of around $8 billion, according to unnamed sources who spoke to the FT.

Bloomberg reported earlier on Sunday that Credit Suisse believed UBS’s initial $1 billion offer was too low and would hurt shareholders as well as employees with stock options, according to unnamed sources.

A deal would mean investors’ stakes in the bank would be nearly worthless. Its two main shareholders are the Saudi National Bank and the Qatar Investment Authority, which hold a combined stake of 17%.

Bloomberg also reported that a partial or full nationalization of Credit Suisse was seen as the only other option for a UBS takeover if a deal could not be reached by late Sunday night when Asian markets open. The Swiss finance ministry declined to comment to the outlet.

The amount of cost cuts Swiss regulators would allow UBS to take through measures such as job cuts will influence how much it can afford to pay, the Wall Street Journal reported. Credit Suisse was already cutting about 9,000 positions from its workforce of just over 50,000.

Options for UBS could include keeping Credit Suisse’s lucrative wealth management operations, keeping only parts of its investment bank, and spinning off its domestic Swiss operations, according to the Journal.

UBS is also negotiating backstops and guarantees from Swiss regulators and may want a clause that would void a deal if markets deem it too risky and skyrocket the cost of its default protection.

Mohammed El-Erian, Allianz’s chief economic adviser, described the deal to BBC News as a “forced marriage” to stop a potential “death spiral” for Credit Suisse.

UBS was considering acquiring part or all of Credit Suisse on Friday, the FT first reported. The Swiss National Bank and Swiss regulators brokered talks in a bid to restore confidence in the country’s banks and considered a merger their “plan A”, according to the newspaper.

The bailout deal comes a week after the collapse of Silicon Valley Bank, which had a ripple effect on the banking sector and rattled investors who feared other banks would follow suit.

Shares of Credit Suisse fell 24% on Wednesday after its largest shareholder, the Saudi National Bank, warned it would not be able to invest more cash in the bank due to regulatory hurdles.

On Thursday it secured a $50 billion lifeline from the Swiss National Bank and its shares jumped a fifth, only to fall another 8% on Friday.

UBS, Credit Suisse and the SNB declined to comment on the FT and did not immediately respond to Insider’s requests for comment.


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