UBS agrees to buy Credit Suisse in major ‘rescue’ deal

By Gloria Methri

UBS Group, Switzerland’s largest banking group, has agreed to acquire Credit Suisse Group in a crucial government-brokered deal. The move is aimed at stopping the stricken bank from triggering a wider international banking crisis.

The government said the deal involving Switzerland’s biggest bank taking over the second largest, was vital to protect depositors and the stability of the Swiss financial center.

UBS Chairman Colm Kelleher said, “This acquisition is attractive for UBS shareholders but let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction that will preserve the value left in the business while limiting our downside exposure. Acquiring Credit Suisse’s capabilities in wealth, asset management and Swiss universal banking will augment UBS’s strategy of growing its capital-light businesses. The transaction will bring benefits to clients and create long-term sustainable value for our investors.”

UBS Chief Executive Officer Ralph Hamers added, “Bringing UBS and Credit Suisse together will build on UBS’s strengths and further enhance our ability to serve our clients globally and deepen our best-in-class capabilities. The combination supports our growth ambitions in the Americas and Asia while adding scale to our business in Europe, and we look forward to welcoming our new clients and colleagues across the world in the coming weeks.”

The takeover was made possible with the support of the Swiss Federal Department of Finance, the Swiss Financial Market Supervisory Authority (FINMA), and the Swiss National Bank.

Under the terms of the all-share transaction, Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held, equivalent to CHF 0.76/share for a total consideration of CHF 3 billion.

UBS benefits from CHF 25 billion of downside protection from the transaction to support marks, purchase price adjustments, and restructuring costs, and additional 50% downside protection on non-core assets. Both banks have unrestricted access to the Swiss National Bank’s existing facilities, through which they can obtain liquidity from the SNB in accordance with the guidelines on monetary policy instruments.

The combination of the two businesses is expected to generate an annual run rate of cost reductions of more than $8 billion by 2027.