Former board member Michael Klein is selling his company to Credit Suisse to subsequently become co-owner and head of the spinoff CS First Boston. Klein's brother is also part of the deal.
Credit Suisse and Michael Klein have reached a trade agreement, according to a «Bloomberg» (behind paywall) report citing anonymous sources. According to the report, Credit Suisse is close to acquiring Klein's investment banking boutique M. Klein & Co., with a price tag of several hundred million dollars potentially.
Michael and Mark
Klein's boutique will be merged with CS First Boston to which Credit Suisse plans to outsource large parts of its international investment banking and sell it to third parties in a further step. According to the agency report, the shareholders of M. Klein & Co., mainly Klein himself, will participate with the money from the sale to CS First Boston.
What makes the transaction notable is that the plan for CS First Boston was co-signed by Klein when he was still on the Credit Suisse board of directors. Now he is to become the future CEO and co-owner of the spinoff. Mark Klein (pictured below), Michael's brother, and himself an executive and shareholder of M. Klein & Co, will also join CS First Boston as part of the deal, according to the report.
(Image: Suro Capital)
Intense Haggling
In the meantime, one could speak of a kind of reverse takeover of the brothers Klein. Although their company will be absorbed by Credit Suisse, they will have an important say in the future of CS First Boston.
It is no coincidence the bank has taken pains to avoid the appearance of conflicts of interest surrounding the transaction. Klein has recused himself from some board votes on CS First Boston, while Credit Suisse haggled intensively over the price for M. Klein & Co. according to the report. The price between what Credit Suisse was offering to pay and what Klein's shareholders were asking were reportedly hundreds of millions of dollars apart.
Beggars Can't be Choosers
Ultimately, it was clear from the beginning that Credit Suisse did not have much choice. If it had had to immediately divest the investment banking units now delegated to CS First Boston, it would likely have suffered enormous write-downs on the value of the business. By gradually handing over CS First Boston to the new owners such as the Klein brothers, Credit Suisse is more likely to avoid losses in the value of this business.
