UBS Group AG has reached an agreement to buy its rival, Credit Suisse, which has recently been rocked by several financial turmoil. Meanwhile, Swiss bank executives and officials are scrambling to contain a crisis caused in part by the collapse of two major US banks last week.
The Credit Suisse purchase agreement was finally concluded by UBS on Sunday, March 19, in favor of 3.2 billion dollars, in an all-share transaction (Swiss bank investors receive 1 UBS share for every 22.48 Credit Suisse shares held). The Swiss bank considered the initial offer of $1 billion too low in crisis.
However, this deal represents a significant discount to the market value of Credit Suisse just two days ago: UBS notes that the acquisition would cost the equivalent of $0.82 per shareIt is less than half of Credit Suisse’s share price, which was $2.01 at the close of trading on Friday.
The combined company will have more than 5 trillion dollars in assets And UBS is planning to reduce their costs by $8 billion over the next four years, UBS said in a statement late Sunday.
The Swiss government helped broker the deal, with the express aim of finalizing the merger before Asian markets opened on Monday morning. As part of the agreement, the Swiss National Bank provided assistance from Credit Suisse and even UBS $108 billion In the form of a loan covered by a guarantee from the Swiss Confederation.
according to The New York TimesThe Swiss government must also expedite the deal by waiving the six-week waiting period normally required before a merger. Swiss authorities do not require UBS to obtain approval from its shareholders.
“In this situation of exceptional uncertainty, the acquisition of Credit Suisse by UBS made it possible to find a solution to ensure financial stability and protect the Swiss economy,” said the Swiss National Bank.
Thursday, March 16, Credit Suisse borrowed $54 billion in the Swiss National Bank. A few hours ago, the latter offered to provide liquidity to Credit Suisse “if necessary”, but the bank’s share price remains the same dropped nearly 7% tomorrow.
Credit Suisse shares have fallen in recent weeks and trading was halted on Wednesday March 15th after the share price rose down 21%. The day before, the bank said it had discovered “material weaknesses” in its financial reporting processes for 2021 and 2022. In response, its main backer, the National Bank of Saudi Arabia, said it would not buy any more Credit Suisse shares. The recent failures of Silicon Valley Bank (SVB) and Signature Bank in the US, stemming in part from rising interest rates, have fueled uncertainty about broader vulnerabilities in the banking system worldwide, exacerbated by red flags at Credit Suisse. However, the collapse of the bank was not directly caused by SVB and Signature Bank, and its problems preceded the current crisis, as it ended the fiscal year 2022 with Almost a loss $8 billion. The bank itself and some of its officials and advisors have also been linked to recent scandals, including accusations of fraud and failure to prevent money laundering.
Translated article from the American magazine Forbes – Author: Marisa Delato
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