A bid by UBS Group AG to acquire Credit Suisse Group AG for up to $1 billion has reportedly been rejected by the ailing Swiss company with the backing of its largest shareholder. Credit Suisse, according to unnamed sources, thinks the offer is too low and will harm both shareholders and employees who have deferred stock awards. The price was 0.25 francs per share, payable in stock, and the offer was made on Sunday. NewsOTG gathered that UBS insisted on a major adverse change clause that would nullify the agreement if its credit default spreads increased by at least 100 basis points. At Friday’s end, Credit Suisse was down 8% to 1.86 francs.
Following the failure of many smaller American bankers, Swiss authorities are apparently attempting to mediate an agreement to handle a Credit Suisse rout that has shaken the world financial system over the past week. The Swiss central bank provided some liquidity support, but the market drama increases the chance that clients or counterparties would keep leaving, which could have an impact on the entire industry. Swiss and American regulators have weighed in on these complicated conversations regarding what would be the first merger of two globally significant systemically important banks since the financial crisis, according to persons with knowledge of the situation. After a week in which clients withdrew funds and counterparties withdrew from certain businesses with Credit Suisse, discussions increased on Saturday as all parties pushed for a quick-execution solution.
A major development for UBS, which has long been averse to a merger with its rival, would be the potential acquisition of Credit Suisse. But, by purchasing Credit Suisse, UBS would be able to acquire its wealth and asset management businesses while possibly selling off its investment banking branch. The destiny of Credit Suisse’s Swiss universal bank division, the only major division of the company to turn a profit last year, is still being discussed, according to sources. Both UBS and Credit Suisse have declined to comment because the situation is uncertain. The possible merger would nonetheless represent a substantial advancement for the Swiss financial industry and might have wider ramifications for the entire sector globally.
