UBS is taking over Credit Suisse in what amounts to an arranged marriage. But it gains a hefty dowry.
On Sunday evening, a deal was reached by which UBS will acquire its rival which is just across the street from it in Zurich. With that, UBS enhances its position as a global wealth manager, according to a statement from Switzerland's largest bank.
With the takeover, UBS will have $5 trillion dollars of invested assets of which $3.4 trillion will be in wealth management. In addition, UBS also reinforces its position as the leading universal bank in Switzerland and a leading asset manager in Europe with invested assets of more than $1.5 trillion.
The Deal
Credit Suisse shareholders will receive one UBS share for 22.48 Credit Suisse shares, representing a transaction value of 0.76 francs per share and a total price tag of three billion francs.
UBS will also benefit from downside protection of 25 billion francs ($27 billion) from the transaction to cover trademarks, purchase price adjustments, and restructuring costs. An additional downside protection of 50 percent exists on non-core assets. The combined entity will also seek to reduce costs by over eight billion dollars by 2027, according to UBS.
UBS expects the transaction to be accretive to earnings per share through 2027 and for the bank to continue to have a capitalization well above its target of 13 percent.
The New Leadership
Current UBS chairman Colm Kelleher and CEO Ralph Hamers will also have those roles at the new entity.
A decidedly more muted statement came from Credit Suisse Chairman Axel Lehmann who said that «given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome. This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute its new strategy, we are forced to reach a solution today that provides a durable outcome.»
Discussions on the transition were initiated jointly by the Swiss National Bank, the Federal Department of Finance, and Finma. The transaction isn't subject to shareholder approval with UBS having obtained pre-approval from the same authorities.
