UBS offers to buy Credit Suisse for $1 billion

UBS has offered to buy Credit Suisse for up to $1 billion, with Swiss authorities planning to change the country’s laws to circumvent a shareholder vote on the deal as they race to finalize a deal before Monday .

The all-stock deal between Switzerland’s two largest banks is expected to be signed as early as Sunday evening and will be valued at a fraction of Credit Suisse’s closing price on Friday, virtually eliminating target shareholders, four people with direct knowledge of the situation. said.

The offer was announced on Sunday morning with a price of SFr 0.25 per share payable in UBS shares, well below Credit Suisse’s closing price of SFr 1.86 on Friday, the sources said. UBS also insisted on a material adverse change that voids the deal if its credit default spreads increase by 100 basis points or more, they added.

The situation is changing rapidly and there is no guarantee that the conditions will remain the same or that a deal will be reached, all stressed.

Some people have said the current terms are unfair to Credit Suisse and its shareholders. Others criticized plans to override normal corporate governance rules by preventing a UBS shareholder vote.

Contact between the two lenders has been limited and terms have been heavily influenced by the Swiss National Bank and regulator Finma, the sources said. The U.S. Federal Reserve has given its approval to advance the deal, they added.

While the current terms value Credit Suisse’s equity at up to $1 billion, the figure does not reflect the additional steps the Swiss National Bank will take to ensure the deal is completed.

The two sides have been engaged in talks with regulators since Wednesday, when Credit Suisse asked the SNB to provide it with a 50 billion Swiss franc ($54 billion) emergency credit line.

When that safety net failed to halt a plunge in its share price and prevent panicked customers from withdrawing their money, the central bank stepped in to force a merger after concerns about the viability of the second lender from the country.

Deposit outflows from Credit Suisse exceeded 10 billion francs a day at the end of last week, the Financial Times reported. Customers withdrew 111 billion Swiss francs from the group in the last three months of last year.

On Saturday evening, the Swiss cabinet met at the finance ministry in Bern for a series of presentations from government officials, the SNB, market regulator Finma and representatives from the banking industry.

The government is preparing emergency measures to speed up the takeover and plans to introduce legislation that will bypass the normal six-week consultation period required for UBS shareholders so that the deal can be completed immediately, the sources said. .

The framework for the deal was designed by Swiss regulators to provide maximum stability to the country’s banking system, people briefed on the matter said. Swiss authorities have already obtained prior approval from relevant regulators in the United States and Europe, who are expected to issue coordinated statements today.

UBS will significantly reduce investment banking from Credit Suisse, so the combined entity will represent no more than a third of the merged group, two of the people said.

However, the current term sheet of the deal does not specify what will happen to individual Credit Suisse business divisions and merely describes a 100% takeover of the group.

Traders have given Credit Suisse the codename Cedar and UBS is called Ulmus, according to people briefed on the matter.

UBS is seeking concessions and protections from the government, particularly against any pending legal cases and regulatory investigations into Credit Suisse that could result in fines or losses, the FT reported. However, he is unlikely to get compensation for any loss of assets, said one of those involved.

UBS also wants to be allowed to phase in any additional demands it faces under the global capital rules that govern the world’s largest banks.

The SNB, UBS, Credit Suisse and Finma declined to comment.

Additional reporting by Sam Jones


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