UBS Group in Advanced Talks to Acquire Credit Suisse in Historic Banking Merger
By UBS Group (NYSE:UBS) is in advanced talks to acquire all or part of Credit Suisse (NYSE:CS) in what would be the most significant banking merger in Europe since the 2008 Great Recession. According to the Financial Times, UBS is offering to buy Credit Suisse for as much as $1 billion. However, Credit Suisse is reportedly balking at the offer, arguing it is too low and would hurt shareholders and employees.[0]
Under one likely scenario, the deal would involve UBS acquiring Credit Suisse to obtain its wealth and asset management units, while possibly divesting the investment banking division. UBS is in talks with Swiss regulators to obtain backstops and guarantees and is seeking to include a clause that would nullify the agreement if financial markets deem it to be hazardous and cause the expense of its default protection to skyrocket.[1]
On Sunday, UBS announced an offer of 0.25 francs per share to be paid in stock.[0] UBS also insisted on a material adverse change that voids the deal if its credit default spreads jump by 100 basis points or more.[2] UBS has also asked the Swiss government to cover about $6bn (£4.9bn) in costs if it were to buy Credit Suisse, according to sources quoted by Reuters.
The two Swiss banks are talking about an array of solutions and UBS is assessing the potential risks a deal could have for itself.[3] UBS has set a number of conditions related to any deal.[4]
It is of utmost importance to consider the destiny of the bank, as it is among the 30 globally-recognized ‘systemically important' banks that are considered “too big to fail”.[5] The problems have coincided with the failure of two lenders in the US – Silicon Valley Bank and Signature Bank – raising fears over the health of the banking system.[6]
UBS is pushing for a quick solution in an effort to restore confidence in the country's banks.[7] Talks are reportedly involving the government and regulators, with one option on the table involving a state-backed guarantee to protect UBS from the effect of losses on Credit Suisse’s balance sheet, facilitating a merger.[8]
0. “UBS offers to buy Credit Suisse for up to $1 billion, the Financial Times reports” CNBC, 19 Mar. 2023, https://www.cnbc.com/2023/03/19/ubs-offers-to-buy-credit-suisse-for-up-to-1-billion-the-financial-times-reports.html
1. “UBS Offers up to $1 Billion to Rescue Credit Suisse: Report” Business Insider, 19 Mar. 2023, https://www.businessinsider.com/credit-suisse-ubs-offers-up-to-billion-rescue-deal-report-2023-3
2. “Credit Suisse Said to Push Back Against UBS's $1 Billion Offer” Yahoo Finance, 19 Mar. 2023, https://finance.yahoo.com/news/credit-suisse-said-push-back-123923935.html
3. “UBS said to be in talks to take over embattled lender Credit Suisse (NYSE:CS)” Seeking Alpha, 17 Mar. 2023, https://seekingalpha.com/news/3948655-ubs-said-to-be-in-talks-to-take-over-embattled-lender-credit-suisse
4. “A Possible Historic Deal in the Works” finews.com, 19 Mar. 2023, https://www.finews.com/news/english-news/56312-ubs-credit-suisse-snb-finma-historic-deal-merger
5. “Future of Credit Suisse hangs in the balance as efforts intensify to rescue stricken bank” Daily Mail, 18 Mar. 2023, https://www.dailymail.co.uk/news/article-11876895/Future-Credit-Suisse-hangs-balance-efforts-intensify-rescue-stricken-bank.html
6. “Credit Suisse bank: UBS is in talks to take over its troubled rival” BBC, 19 Mar. 2023, https://www.bbc.com/news/business-65004605
7. “UK regulators back merger of banking giants Credit Suisse and UBS” Sky News, 19 Mar. 2023, https://news.sky.com/story/uk-regulators-back-merger-of-banking-giants-credit-suisse-and-ubs-12837876
8. “Credit Suisse: Bank of England won't object to takeover as UBS considers $1bn bid” The Guardian, 19 Mar. 2023, https://www.theguardian.com/business/2023/mar/19/credit-suisse-bank-of-england-wont-object-to-takeover-as-ubs-considers-1bn-bid
