UBS Upgrades Offer, Agrees to Buy Credit Suisse for Over $2 Billion
UBS to buy rival Credit Suisse for $2 billion, a fraction of its current market value.
Swiss authorities are planning to change the country’s laws to bypass a shareholder vote on the transaction.
Synopsis
There has been a mad scramble to rescue the 167-year-old bank before financial markets reopen on Monday. UBS was reportedly under much pressure from the Swiss govt to take over its big rival to bring the unfolding crisis under control.
UBS Group AG has upgraded its initial offer and agreed to buy Credit Suisse for more than $2 billion in a deal brokered by the Swiss government, reports said on Sunday.
A few hours earlier, it had made an offer of up to $1 billion for the same.
UBS will take over Credit Suisse, Swiss authorities said, in an attempt to contain a widening crisis of confidence in global finance.
There has been a mad scramble to rescue the 167-year-old bank before financial markets reopen on Monday. UBS was reportedly under much pressure from the Swiss govt to take over its big rival to bring the unfolding crisis under control.
Credit Suisse is among the world’s largest wealth managers and one of the 30 global systemically important banks, and its failure would ripple throughout the entire financial system, authorities fear.
“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss central bank said.
The deal includes 100 billion Swiss francs in liquidity assistance for UBS and Credit Suisse.
The latest development follows a brutal week for banking stocks and efforts in Europe and the United States to shore up the sector following the collapse of US lenders Silicon Valley Bank and Signature Bank.
Amid the turmoil, shares of Credit Suisse shed a quarter of their value last week, forcing the bank to tap $54 billion in central bank funding.
As per earlier reports, the Swiss government was planning to change the country’s laws to bypass a shareholder vote on the deal.
UBS and Credit Suisse, Switzerland’s two biggest banks, were locked in discussions with regulators since Wednesday.
Reuters had earlier said quoting a source that UBS was seeking $6 billion from the Swiss government as part of a possible purchase of its rival.
UBS was reportedly insisting on a ‘material adverse change’ that will void the deal in case its credit default spreads jump by 100 basis points or more.
As per Reuters, UBS was looking into a takeover of Credit Suisse that could see the Swiss government offer a guarantee against the risks involved.
UBS was said to be seeking concessions and protections from the government, particularly from any pending legal cases and regulatory investigations into Credit Suisse that could result in fines or losses.
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