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Up to a billion dollars
Report: UBS details offer for Credit Suisse
03/19/2023 1:46 p.m
It would be the largest bank merger in Europe since the financial crisis: the major Swiss bank UBS offers to buy its ailing rival Credit Suisse for up to one billion US dollars. However, the law would have to be changed for this.
According to media reports, the major Swiss bank UBS has offered to take over the tumbling local rival Credit Suisse (CS) for up to one billion US dollars. To this end, the Swiss authorities plan to change the law in such a way that a shareholder vote for the transaction can be bypassed, the Financial Times (FT) reported. The Wall Street Journal (WSJ) also reported on such an offer. Under Swiss law, UBS would normally have to give its shareholders six weeks to deliberate on the takeover. But as time is of the essence, UBS could decide to take over the takeover via an emergency measure without shareholder approval.
On Friday, the major Swiss bank CS was still worth around eight billion francs on the stock exchange. The offer was announced on Sunday morning at a price of CHF 0.25 per share, to be paid in UBS shares, well below Credit Suisse’s closing price of CHF 1.86 on Friday, the FT said. The shareholders would get practically nothing.
In addition, UBS insisted that the deal would be void if its default spreads, i.e. the protection against default, increased by 100 basis points or more. As the situation is changing rapidly, there is no guarantee that terms will remain the same or that an agreement will be reached, the FT report said. However, the authorities tried to come up with a solution before the start of the stock exchange on Monday.
According to another media report, the offer from Credit Suisse was not well received. The Bloomberg news agency reported that the bank is said to have rejected UBS’s terms with the backing of its largest shareholders. Neither the institutes involved nor the supervisory authorities gave a statement on Sunday afternoon.
British central bank supports takeover
According to the FT, the Swiss financial regulator has informed its colleagues in the US and Great Britain that a UBS takeover is the preferred solution to the Credit Suisse crisis. According to a report by Sky News, the Bank of England indicated its approval of a takeover of Credit Suisse by UBS. The British central bank has signaled to its international colleagues and UBS that it will support the emergency transaction, the broadcaster further reported.
A takeover of Credit Suisse by UBS would be the most significant banking merger in Europe since the global financial crisis some 15 years ago. State guarantees should be a prerequisite for such a mega deal. According to media reports, the Swiss government should issue a guarantee to cover the risks associated with the takeover.
Credit Suisse was already battered by scandals and mismanagement when it fell into another downward spiral after the collapse of the US bank Silicon Valley Bank (SVB). Investor confidence appears to have been shaken. The share price of CS fell dramatically in the past few days.