UBS Group AG, a crypto friendly bank, is reportedly offering to purchase Credit Suisse, a global investment bank, for up to $1b, per details on Mar. 19 .
UBS to the rescue
The UBS offer comes after BlackRock rejected claims to a deal to salvage Credit Suisse on March 19. UBS is offering a price of SFr0.25 a share to be paid in UBS stock which is way below the SFr1.86 closing price on Friday, Mar. 17.
Meanwhile, Swiss authorities are also looking to change the country’s laws and bypass the UBS shareholder vote on the transaction as they hurry to conclude the deal before Monday. The deal between the two big banks could be signed as soon as Mar. 19. However, it will wipe out the target’s shareholders, as four knowledgeable people mentioned.
Additionally, USB asserted a material adverse change which nullified the deal if the credit default spreads jumped by 100 basis points or more. The situation is also far-moving, and it’s not guaranteed similar terms or the deal being reached.
The announcement was disapproved; some said it was an unfair deal to Credit Suisse and the shareholders. Others blasted the plans to free normal corporate governance rules by averting a UBS shareholder vote.
Clarity still lacking on the deal
So far, there has been limited contact between the two lenders. Hence, the terms have been substantially influenced by the Swiss National Bank and regulator Finma. The US Federal Reserve (Fed) has approved for the deal to move forward.
Two sources revealed that UBS would significantly reduce the bank’s investment bank such that the combined entity accounts for over one-third of the merged group. However, there still needs clarity on Credit Suisse’s business divisions and simply describes a 100% takeover of the group.
Meanwhile, even though the deal is at $1 billion, the figure does not account for the Swiss National Bank’s additional provisions to ensure the deal goes through to rescue Credit Suisse.