According to The Financial Times, UBS had agreed to acquire Credit Suisse for more than $2 billion. However, a recent statement from UBS was that the total value of the transaction is approximately 3 billion Swiss francs, or $3.25 billion. This is still a substantial discount compared to Credit Suisse’s $8 billion market capitalisation as of March 17.
“This acquisition is attractive for UBS shareholders, but let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure,” said UBS Chairman Colm Kelleher.
To close the deal, Swiss authorities consented to change the country’s regulations to avoid a shareholder vote and to publicise the transaction over the weekend, before the market’s opening.
The Swiss National Bank has also agreed to provide UBS with over $100 billion in liquidity as part of the agreement.
According to a statement issued by UBS, the acquisition has the complete endorsement of the Swiss Federal Department of Finance, the Swiss Financial Market Supervisory Authority (FINMA), and the Swiss National Bank.
UBS is taking over Credit Suisse pic.twitter.com/XF8LEZFXlx
— David Gura (@davidgura) March 19, 2023
If the agreement with UBS failed over the weekend, Swiss authorities contemplated nationalising Credit Suisse in whole or in part as an emergency measure.
European regulators are concerned that Credit Suisse’s rescue plan, which includes bondholder losses, will undermine investor confidence in Europe’s financial sector.
Credit Suisse Group announces it has entered into a merger agreement with UBS. All details available here: https://t.co/IkG4X3wze5 pic.twitter.com/3Obz6zpxSC
— Credit Suisse (@CreditSuisse) March 19, 2023
Since March 15, UBS and Credit Suisse have been in discussions with regulators after Credit Suisse’s largest shareholder, Saudi National Bank, announced not to increase its investment in the Swiss bank because of regulations. The remarks heightened concerns about the bank’s profitability and sparked concerns about potential shareholder financing.
Credit Suisse was established in 1856 to fund the expansion of Swiss railways. It was regarded as the nation’s second-largest bank.