UBS is said to have assigned a legal team to terminate the deal between Credit Suisse and Michael Klein over its purchase of M. Klein & Co.
Just days after acquiring Credit Suisse in a forced takeover, UBS will enter into negotiations with Michael Klein seeking to undo a deal where Klein would have controlled a large part of Credit Suisse's investment bank, according to an article in the «Financial Times» (behind paywall) Tuesday.
Not Enriching Klein
«We assume [Klein] is cherry-picking. The deal was done when the selling bank had a gun held to its head and we are no longer in that position,» the FT report said citing a source close to UBS said. «We are not here to enrich Michael Klein at the expense of our shareholders,» it added.
In early February, Credit Suisse formally acquired the investment banking business of M. Klein & Company (MK&C), part of the Klein Group, for $175 million. In addition to the purchase price, he was paid $10 million for advising on the restructuring of the investment bank.
Legal Team Assigned
To seek a way to invalidate the deal as cheaply as possible, UBS has assigned a legal team to see whether it can be scrapped or a fee is renegotiated. If that proves unworkable, the costs of activating a breakup clause are not material, the «FT» said.
As for Klein, a person close to him said they «seriously doubt» such a transaction can proceed on the agreed terms because Credit Suisse has been taken over. «First Boston can't be what it was meant to be» as a result.
The person went on to say Klein always acted in Credit Suisse shareholders' best interests. As the merger was announced, he contacted UBS to say he understood the CS First Boston deal might not happen.
Criticism of the Deal
The deal between Credit Suisse and Klein was not without its detractors.
In an interview with finews.com, before the completion of the deal Vincent Kaufmann, CEO of Swiss shareholder rights advocacy group Ethos Foundation said the purchase of M. Klein & Co. «does raise serious issues in terms of corporate governance.»
Potential conflicts of the deal didn't bother Credit Suisse CEO Ulrich Koerner who said «I am looking forward to welcoming Michael Klein to the executive board. He is an exceptional banker and dealmaker with proven and recognized entrepreneurial success, and I am confident that CS First Boston will thrive under his leadership.»
That seems like it might not matter anymore.
