UBS buys Credit Suisse in “emergency rescue”

The $3.2b acquisition has the full support of Swiss financial regulators, UBS said.

Swiss banking giant UBS is acquiring rival Credit Suisse for CHF3b (approximately US$3.2b), the bank announced on 19 March. 

In the statement announcing the deal, UBS Chairman Colm Kelleher called it an “emergency rescue” for Credit Suisse whilst saying that the acquisition is attractive for UBS shareholders.

UBS will be the surviving entity after the merger, Credit Suisse announced in a separate statement.

“We have structured a transaction which will preserve the value left in the business while limiting our downside exposure,” Chairman Kelleher said.

The discussions were initiated jointly by the Swiss Federal Department of Finance, FINMA and the Swiss National Bank, and has their full support, UBS said.

“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,” Kelleher added.

Kelleher will be chairman and Ralph Hamers will be the Group CEO of the combined entity.

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Under the terms of the transaction, Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held, equivalent to CHF0.76/share for a total consideration of CHF3b. UBS benefits from CHF 25b (US$26.9b) 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 existing facilities, through which they can obtain liquidity from the SNB in accordance with the guidelines on monetary policy instruments.

The combined business is expected to form Europe’s leading asset manager, with invested assets of more than $1.5t, UBS said.

UBS expects to generate an annual run-rate of cost reductions of more than $8b by 2027.

The announcement merger came just days after Credit Suisse announced that it is borrowing up to CHF50b (approximately $54b) to shore up its liquidity.