UBS Offers to Buy Credit Suisse for Up to $1 Billion Amid Financial Markets Turmoil

UBS Group AG (SIX:UBSG) has offered to purchase Credit Suisse for up to $1 billion, as the Swiss government is planning to change the country’s laws to bypass a shareholder vote on the transaction. The Financial Times reported that the deal is set to be signed as soon as Sunday, citing people familiar with the matter. The transaction comes amid a turbulent time for banking stocks globally, with the collapse of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) in the US. Credit Suisse, one of the largest wealth managers in the world, is also under pressure from authorities to take action before financial markets reopen on Monday. A failure of the bank would create ripples throughout the financial system.

Detail of the deal:

• UBS’s all-share deal was set to be signed as soon as Sunday.
• An offer was made on Sunday morning at 0.25 Swiss francs ($0.27) per Credit Suisse share, well below Friday’s closing price of 1.86 Swiss francs, virtually wiping out the bank’s existing shareholders.
• UBS has also insisted on a ‘material adverse change’ that voids the deal in the event its credit default spreads jump by 100 basis points or more.
• A person with knowledge of the talks earlier told Reuters that UBS was seeking $6 billion from the Swiss government as part of a possible purchase of its rival.

The Swiss Bank Employees Association has called for the immediate creation of a task force to deal with the risk to jobs. One source previously cautioned that the talks were encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks combine.

Possible outcomes of the deal:

• Credit Suisse’s Swiss business spun off.
• The takeover talks throwing into doubt plans to hive off its investment bank under the First Boston brand.
• U.S. authorities are working with their Swiss counterparts to help broker a deal.
• The Bank of England has indicated to international counterparts and to UBS that it would back the proposed takeover of Credit Suisse, which counts Britain as a key market.

The situation is fast-moving, and there is no guarantee that terms will remain the same or that a deal will be reached. Credit Suisse and UBS declined to comment, and the Swiss government did not immediately respond to a request for comment.