UBS Group AG Offers to Acquire Credit Suisse Group AG for Up to $1 Billion
UBS Group AG is reportedly offering to acquire Credit Suisse Group AG for up to $1 billion, a deal that the Swiss financial firm is pushing back on with backing from its biggest shareholder. Talks are ongoing between UBS, Credit Suisse, the Swiss National Bank (SNB), and regulators, with one option on the table involving a state-backed guarantee to protect UBS from losses on Credit Suisse's balance sheet. UBS has also asked the Swiss government to take on certain legal costs and potential future losses and is negotiating backstops and guarantees from Swiss regulators.
The offer is reportedly 0.25 francs a share to be paid in UBS stock and includes a material adverse clause that would void the deal if Credit Suisse's credit default spreads jump by 100 basis points or more. Credit Suisse's future hangs in the balance as the Swiss government and regulators seek to broker a deal that would address a rout in the bank's shares and bonds.
The potential rescue of Credit Suisse would be the first combination of two global systemically important banks since the financial crisis and the goal is for an announcement of a deal between the two banks by Sunday evening at the latest. UBS has a market capitalisation of $56.6 billion, while Credit Suisse closed trading on Friday with a value of $8 billion.
Credit Suisse is categorised by the global Financial Stability Board as one of just 30 “systemically important” lenders in the global banking system and employs approximately 5,000 people in the UK, making it one of the largest investment banking employers in the City. Its meltdown is threatening to spill over into a systemic crisis affecting the global financial system at a time when the U.S. banking system is already highly stressed in the wake of the Valley SVB Financial Group (SIVB) and Signature Bank (SBNY).
The complex discussions are ongoing as all sides push for a quick solution before any further damage is done. UBS is asking the Swiss government to take on certain legal costs and potential future losses and is negotiating backstops and guarantees from Swiss regulators. It is hoped that a takeover of Credit Suisse will avert the kind of contagion that evokes genuine comparisons with the crisis of 2008.
0. “Credit Suisse Talks Extend Into Sunday as Markets Await Deal” Yahoo News, 19 Mar. 2023, https://news.yahoo.com/ubs-seeks-swiss-backstop-credit-115808443.html
1. “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
2. “UBS faces pushback after offering to buy Credit Suisse for $1 billion” Fortune, 19 Mar. 2023, https://fortune.com/2023/03/19/ubs-faces-pushback-after-offering-to-buy-credit-suisse-for-1-billion
3. “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
4. “UBS and regulators rush to seal Credit Suisse takeover deal possibly by Sunday: reports” MarketWatch, 18 Mar. 2023, https://www.marketwatch.com/story/ubs-and-regulators-rush-to-seal-credit-suisse-takeover-deal-reports-2f4ccfbc
5. “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