UBS Group in Talks to Acquire Credit Suisse in Europe’s Biggest Banking Merger Since 2008

UBS Group (NYSE:UBS) is reportedly 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.[0] This comes after a $54bn loan to Credit Suisse from the Swiss central bank failed to halt the precipitous slide in its share price.[1] UBS is reportedly proposing to pay up to $1 billion to rescue its troubled Swiss rival Credit Suisse, according to the Financial Times, who cited people familiar with the matter.[1]

However, Bloomberg reported that Credit Suisse thinks the offer is too low and would hurt both shareholders as well as employees with stock options.[2] Furthermore, American investment company BlackRock stated in a March 18 tweet that it “has no interest” in acquiring Credit Suisse.[3] UBS is in talks with Swiss regulators regarding backstops and guarantees, and is asking for a clause that would nullify the agreement if the markets view it as a risky venture and the cost of their default insurance rises.[2]

Credit Suisse had already commenced a major restructuring program to bring back stability and profitability.[4] It has faced various scandals and controversies over recent years, including the fallout from its involvement with the collapsed supply chain finance firm, Greensill Capital, which led to $1.7 billion in losses.[4]

Reuters quoted sources as saying that UBS had requested the Swiss government to cover approximately $6bn in expenses if it were to acquire Credit Suisse. It has been reported that UBS is requesting the Swiss government to offer a multi-billion dollar guarantee in order to protect it from any potential losses that could be incurred from the acquisition of its smaller rival.

It is reportedly believed by the Swiss National Bank (SNB) and Switzerland’s financial regulator that the acquisition of Credit Suisse, an investment bank, by UBS, Switzerland's largest bank, is the only choice to avoid a “collapse in confidence” in Credit Suisse.[5] Neither the Bank of England nor Credit Suisse nor UBS offered any comment on Sunday.[6]

In the UK, Credit Suisse employs roughly 5,000 individuals, making it one of the biggest investment banking employers in the City.[6] UBS is in talks with Swiss regulators regarding backstops and guarantees, and is asking for a clause that would nullify the agreement if the markets view it as a risky venture and the cost of their default insurance rises.[2]

0. “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

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 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

3. “Switzerland preparing emergency measures for UBS’ takeover of Credit Suisse: Report” Cointelegraph, 19 Mar. 2023, https://cointelegraph.com/news/switzerland-preparing-emergency-measures-for-ubs-takeover-of-credit-suisse-report

4. “BlackRock denies report that it's preparing a takeover bid for Credit Suisse” CNBC, 18 Mar. 2023, https://www.cnbc.com/2023/03/18/blackrock-is-working-on-a-rival-takeover-bid-for-credit-suisse-financial-times-reports.html

5. “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

6. “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

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