Topline
UBS Group AG has struck a deal to buy Credit Suisse, a rival Swiss bank facing economic uncertainty, Switzerland’s central bank announced Sunday, in a government-backed deal reportedly worth over $2 billion—as bank executives and Swiss officials sprint to contain a crisis sparked in part by the collapse of two major U.S. banks last week.
The company logo is seen at the global headquarters of Swiss bank Credit Suisse the day after its … [+]
Key Facts
UBS ultimately agreed to pay more than $2 billion for Credit Suisse, multiple news outlets reported Sunday, up from a $1 billion initial offer that Credit Suisse reportedly viewed as too low (the Swiss National Bank did not offer a purchase price when announcing the deal).
Even at double the initial bid, the $2 billion deal would represent a massive discount compared to Credit Suisse’s market capitalization just two days ago: In the most recent offer, UBS would pay over $0.54 (or 0.50 Swiss Francs) per share in stock, according to the Financial Times, compared to Credit Suisse’s $2.01 share price when markets closed Friday.
The Swiss government helped broker the deal, with an apparent goal of completing the merger before Asian markets open Monday morning.
As part of the agreement, the Swiss National Bank—the country’s central bank—offered Credit Suisse and UBS up to $108 billion in liquidity assistance loans, it said in a statement Sunday.
The Swiss government is also expected to speed the deal up by waiving the six-week-long waiting period normally required before a merger, according to the New York Times, and Swiss authorities are set to change laws to not require a shareholder vote to quicken the deal, the Financial Times reported.
Big Number
$54 billion. That’s how much Credit Suisse borrowed from the Swiss National Bank on Thursday. The central bank offered to provide liquidity to Credit Suisse “if necessary” hours earlier, but the bank’s share price still slid almost 7% the following day.
Key Background
Shares of Credit Suisse have plummeted in recent weeks, and trading was halted Wednesday after the share price fell up to 21%. On Tuesday, the bank said it had suffered “material weakness” in its 2021 and 2022 financial reporting processes. In response, its biggest backer, the Saudi National Bank, said it wouldn’t buy any more shares in Credit Suisse. With the recent collapses of Silicon Valley Bank and Signature Bank in the U.S., uncertainty has spread that wider financial issues could be caused worldwide—concerns that intensified after warning signs appeared at Credit Suisse. The bank’s downturn isn’t linked to SVB and Signature, and its problems predate the current crisis—it ended the 2022 fiscal year with a loss of nearly $8 billion. The bank itself and some of its executives and advisers have also recently been linked to scandals, including fraud and failing to prevent money laundering.
Further Reading
What’s Happening With Credit Suisse, Explained: Embattled Bank Rattles Stock Market As Banking Crisis Deepens (Forbes)
UBS offers to buy Credit Suisse for up to $1bn | Financial Times (Financial Times)
UBS Nears Deal to Buy Credit Suisse – The New York Times (New York Times)
Credit Suisse Said to Push Back Against UBS’s $1 Billion Offer (Bloomberg)
UBS Offers $1 Billion to Buy Credit Suisse (Wall Street Journal)
Source: https://www.forbes.com/sites/marisadellatto/2023/03/19/ubs-agrees-to-buy-embattled-bank-credit-suisse-central-bank-says/