UBS offers to buy Credit Suisse for up to $1 billion

UBS has offered to buy Credit Suisse for up to $1 billion, and Swiss authorities plan to change the country’s laws to bypass a shareholder vote on the transaction as they rush to finalize the deal before Monday.

The all-share deal between Switzerland’s two biggest banks is scheduled to be signed on Sunday evening and will be priced at a fraction of Credit Suisse’s closing price on Friday, except for the target’s shareholders, four people with direct knowledge of the bank. situation said.

The offer was announced on Sunday morning at 0.25 francs per share in UBS stock, well below Credit Suisse’s closing price of 1.86 francs on Friday, the people said. UBS also insisted on a material adverse change that voids the deal if default spreads jump 100 basis points or more, they added.

The situation is evolving rapidly and there is no guarantee that conditions will remain unchanged or that an agreement will be reached, they all stressed.

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

The relationship between the two lenders was limited and terms were heavily influenced by the Swiss National Bank and regulator Finma, the people said. The US central bank gave its consent to the deal, they added.

While Credit Suisse’s equity under current terms is up to $1 billion, that number does not reflect additional provisions made by the Swiss National Bank to secure the deal.

Both sides have been in talks with regulators since Wednesday, when Credit Suisse asked the SNB to provide it with an SFR 50 billion ($54 billion) emergency credit line.

When that safeguard failed to stop its share price from falling and to stop panicked customers withdrawing their money, the central bank stepped in to force the merger after concerns about the viability of the country’s second-biggest lender.

The Financial Times reported that deposit outflows from Credit Suisse exceeded 10 billion francs a day. Customers withdrew 111 billion francs from the group in the last three months of last year.

On Saturday evening, the Swiss cabinet gathered at the Ministry of Finance in Bern, where government officials, the SNB, the market regulator Finma and representatives of the banking sector held presentations.

The government is preparing emergency measures to speed up the takeover and plans to introduce legislation to bypass the usual six-week consultation period for UBS shareholders so the deal can be closed immediately, the people said.

The framework of the transaction was designed by the Swiss regulators in such a way as to ensure maximum stability in the country’s banking system, said those informed about the case. The Swiss authorities have already obtained preliminary approval from the competent regulatory authorities in the United States and Europe, which are expected to issue coordinated statements today.

UBS will dramatically reduce Credit Suisse’s investment bank, making the combined company no more than a third of the combined group, the two said.

However, the current contractual terms of the deal do not determine what will happen to individual Credit Suisse businesses, but only outline a 100 percent takeover of the group.

Negotiators have given Credit Suisse the code name Cedar and UBS as Ulmus, according to people briefed on the matter.

According to the FT report, UBS is seeking concessions and protection from the government, particularly in light of ongoing legal cases and regulatory investigations involving Credit Suisse, which could result in fines or losses. However, it is unlikely that he will receive compensation for the possible loss of property, said one of the people involved.

UBS also wants to be able to phase in any extra claims it faces under global capital rules governing the world’s biggest banks.

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

Additional reporting by Sam Jones