19th March 2023 – (Zurich) UBS Group AG, has reportedly offered to buy Credit Suisse Group AG for as much as US$1 billion. However, the deal is being met with resistance from Credit Suisse, which believes the offer is too low and would hurt shareholders and employees who have deferred stock. Credit Suisse closed down 8% to 1.86 francs at the close on Friday.
Sources close to Credit Suisse have also revealed that a final decision has not yet been made regarding the imposition of losses on bondholders, and that the terms could potentially change. It has been suggested that the size of the losses imposed on bondholders could be greater if Credit Suisse were to be wound down rather than taken over by UBS, one of the sources stated.
Swiss authorities are seeking to broker a deal that would address a rout in Credit Suisse that sent shock waves across the global financial system over the past week. Panicked investors dumped its shares and bonds following the collapse of several smaller US lenders. A liquidity backstop by the Swiss central bank briefly arrested the declines, but the market drama carries the risk that clients or counterparties would continue fleeing, with potential ramifications for the broader industry.
The complex discussions over what would be the first combination of two global systemically important banks since the financial crisis have seen Swiss and US authorities weigh in, according to people with knowledge of the matter. Talks accelerated Saturday, with all sides pushing for a solution that can be executed quickly after a week that saw clients pull money and counterparties step back from some dealings with Credit Suisse.
UBS’s offer was communicated on Sunday with a price of 0.25 francs a share to be paid in stock. UBS also insisted on a material adverse change that voids the deal if its credit default spreads jump by 100 basis points or more, the Financial Times reported.
The potential deal between UBS and Credit Suisse has far-reaching implications for the broader financial industry. The troubles at Credit Suisse, coupled with the collapse of smaller US lenders, have sent shock waves across the global financial system. Swiss authorities are now seeking to broker a deal that would address the situation and restore stability to the markets.
Credit Suisse’s biggest shareholder is backing the firm in pushing back on the UBS offer. The bank ended Friday with a market value of about 7.4 billion francs (US$8 billion). The bank believes that the offer is too low and would harm shareholders and employees who have deferred stock.
