UBS has offered to buy Credit Suisse for up to US$1 billion ($1.34 billion), reports Financial Times on March 19. The FT report says Swiss authorities are planning to change the country’s laws to bypass a shareholder vote on the transaction, in order to finalise a deal before March 20.
The all-share deal between Switzerland’s two biggest banks is set to be signed as soon as the evening of March 19, according to FT’s journalists in London. It will be priced at a fraction of Credit Suisse’s closing price on March 17, says FT, citing four people with direct knowledge of the situation.
According to FT’s sources, the offer was communicated with a price of 0.25 Swiss francs (36 cents) a share to be paid in UBS stock, far below Credit Suisse’s closing price of 1.86 Swiss francs. “UBS has also insisted on a material adverse change that voids the deal if its credit default spreads jump by 100 basis points or more,” they added.
While the current terms value Credit Suisse’s equity at up to US$1 billion, the figure does not reflect additional provisions the Swiss National Bank (SNB) will make to ensure the deal is done, says FT.
Negotiations have been ongoing since March 15, when Credit Suisse asked the SNB to provide it with an emergency 50 billion Swiss franc credit line. The central bank has stepped in to force a merger after becoming concerned about the viability of the country’s second-largest lender.
According to two of FT’s sources, UBS will dramatically shrink Credit Suisse’s investment bank, so that the combined entity will make up no more than a third of the merged group. “However, the current term sheet for the deal does not specify what will happen to Credit Suisse’s individual business divisions, and simply outlines a 100% takeover of the group,” reads the FT report.
See also: UBS to explore Credit Suisse deal in crisis combination
Negotiators have given Credit Suisse the code name Cedar and UBS is referred to as Ulmus, according to people briefed on the matter.
The SNB, UBS, Credit Suisse and regulator Finma all declined comment to FT.
An earlier report by FT claimed BlackRock is working on a rival bid for Credit Suisse, but the US firm later denied interest in a deal. “BlackRock is not participating in any plans to acquire all or any part of Credit Suisse, and has no interest in doing so,” according to a spokesman for the US investment giant.
See also: BlackRock not working on rival bid for Credit Suisse
Credit Suisse, which traces its roots back to 1856, has been hammered over recent years by a series of blowups, scandals, leadership changes and legal issues. The company’s 7.3 billion Swiss franc loss last year wiped out the previous decade’s worth of profits.
UBS and Credit Suisse are two big names in Singapore’s wealth management space. That said, Singapore’s trio of banks — DBS, OCBC Bank and UOB — confirmed last week that their exposures to Credit Suisse are “insignificant”, according to the Monetary Authority of Singapore (MAS).
“Banks in Singapore are well capitalised and conduct regular stress tests against credit and other risks. Their liquidity positions are healthy, underpinned by a stable and diversified funding base,” said MAS on March 16.