UBS offers up to US$ 1 billion to buy Credit Suisse – 03/19/2023 – Market

UBS has offered to buy Credit Suisse for up to $1 billion (R$5.28 billion at current exchange rates), with Swiss authorities planning to change the country’s laws to avoid a shareholder vote on the transaction as they race to finalize a deal before Monday.

The share deal between Switzerland’s two biggest banks is due to be signed on Sunday evening and will be priced at a fraction of Credit Suisse’s closing price on Friday, all but eliminating the target shareholders, four people with knowledge. straight from the situation said.

The offer was communicated on Sunday morning with a price of CHF 0.25 (R$1.43) per share to be paid in UBS shares, far below Credit Suisse’s closing price of CHF 1.86 ( R$10.64) on Friday, the sources said.

Negotiations are still ongoing, and there is no guarantee that the terms will remain the same or that an agreement will be reached, emphasized all those involved.

Some of the people said the current terms were unfair to Credit Suisse and its shareholders. Others criticized plans to overturn normal corporate governance rules by preventing UBS shareholders from voting.

There was limited contact between the two lenders and the terms were heavily influenced by Switzerland’s central bank and regulator Finma, the people said. The US Federal Reserve has given its consent for the deal to proceed, they added.

While current terms value Credit Suisse’s equity at up to $1 billion, the figure does not reflect additional provisions Switzerland’s central bank will make to ensure the deal closes.

Both sides have been in discussions with regulators since Wednesday, when Credit Suisse asked the SNB for a CHF50 billion ($54 billion) emergency credit line.

When that mechanism failed to halt a slump in its share price and prevent panicked customers from withdrawing their money, the central bank stepped in to force a merger after growing concerned about the viability of the country’s second-largest creditor.

Credit Suisse’s outflow of deposits topped CHF10 billion a day at the end of last week, the Financial Times reported. Customers withdrew CHF 111 billion from the group in the last three months of last year.

On Saturday night, the Swiss cabinet gathered at the finance ministry in Bern for a series of presentations by government officials, the SNB, market regulator Finma and representatives of the banking sector.

The government is preparing emergency measures to speed up the takeover and plans to introduce legislation that will circumvent the normal six-week consultation period required of UBS shareholders so the deal can be sealed immediately, the people said.

UBS will dramatically shrink Credit Suisse’s investment bank, so the combined entity will make up no more than a third of the merged group, two of the people said.

However, the currently valid proposal for the deal does not specify what will happen to the individual business divisions of Credit Suisse and simply outlines a 100% takeover of the group.

Dealers gave Credit Suisse the codename Cedar and UBS is known as Ulmus, according to people briefed on the matter.

UBS is seeking concessions and protections from the government, particularly from any pending legal proceedings and regulatory investigations into Credit Suisse that could result in fines or damages, the FT reported. However, it is unlikely to receive compensation for any asset losses, one of the people involved said.

UBS also wants to be allowed to gradually introduce any extra demands it would face under the global capital rules that govern the world’s biggest banks.

The SNB, UBS, Credit Suisse and Finma declined to comment.

Additional reporting by Sam Jones.

Translation Ana Estela de Sousa Pinto