19th March 2023 – (Zurich) UBS Group AG is proposing a US$1 billion all-share deal to purchase Credit Suisse Group AG in an effort to save the troubled lender, as reported by the Financial Times. Swiss authorities are moving quickly to alter the country’s laws, bypassing the shareholder voting process to finalise the acquisition before Monday.
The offer, submitted on Sunday morning, sets the price at 0.25 francs per share to be paid in UBS stock. UBS has also included a material adverse change clause that would nullify the deal if its credit default spreads increase by 100 basis points or more. Credit Suisse’s stock closed down 8% at 1.86 francs on Friday.
A government-orchestrated deal could help stabilise Credit Suisse, which has experienced a tumultuous week with investors offloading shares and bonds following the collapse of several smaller U.S. lenders. The Swiss central bank provided a liquidity backstop, but the ongoing market turmoil raises concerns about potential impacts on the wider financial industry.
The proposed merger of two globally systemically important banks, the first since the financial crisis, has involved Swiss and U.S. authorities in complex discussions. Negotiations intensified on Saturday, with all parties seeking a rapid resolution after a week of clients withdrawing funds and counterparties distancing themselves from Credit Suisse.
The Financial Times reports that contact between the two banks has been limited, with the Swiss National Bank and regulator Finma heavily influencing the terms. The fast-moving situation could change, and there is no guarantee that a deal will be finalised or that the terms will remain the same.
In an effort to expedite the takeover, the government is preparing emergency measures and plans to introduce legislation that will bypass the standard six-week consultation period required for UBS shareholders.
If the deal goes through, it would be a major consolidation in the Swiss banking industry, combining two of the largest banks in the country. However, the move to bypass the shareholder vote has raised concerns among some investors and market analysts.
The possible takeover is of particular interest following the collapse of two U.S. banks, which triggered fears of contagion. During the week, UBS made a net profit of US$7.6 billion, while Credit Suisse suffered a loss of US$7.9 billion.