UBS has offered to buy Credit Suisse for up to $1 billion, with Swiss authorities planning to change the country’s law to bypass a shareholder vote on the transaction as it rushes to complete it. deal by Monday.
The all-share deal between Switzerland’s two largest banks will be signed shortly after Sunday evening and will be valued at a fraction of Credit Suisse’s closing price on Friday, all but the target shareholders. , four people with direct knowledge of the situation said.
Residents said the offer was announced on Sunday morning at SFr 0.25 a share paid in UBS shares, well below Credit Suisse’s closing price of SFr 1.86 on Wednesday. Six. UBS has also highlighted a key adverse change that invalidates the deal if bad debt spreads spike by 100 basis points or more, they added.
Everyone stressed that the situation is evolving rapidly and that there is no guarantee that the terms will stay the same or that an agreement will be reached.
Some say the current terms are unfair to Credit Suisse and its shareholders. Others criticized the plans to invalidate normal corporate governance rules by blocking a UBS shareholder vote.
Residents said there has been little contact between the two lenders and terms have been hit hard by the Swiss National Bank and the Finma regulator. The US Federal Reserve has agreed to progress on the deal, they added.
While current terms value Credit Suisse’s equity at $1 billion, this figure does not reflect the additional terms the Swiss National Bank would put in place to secure the deal. be done.
Both sides were locked in discuss with regulators since Wednesday, when Credit Suisse asked the SNB to provide them with an emergency line of credit of SFr50 billion ($54 billion).
When this support failed to stop a drop in share prices and prevent panicking customers from withdrawing their funds, the central bank stepped in to force a merger after concerns over the viability of the major lender. second of the country.
Deposits from Credit Suisse amounted to SFr 10 billion a day at the end of last week, the Financial Times reported. Customers withdrew SFr 111 billion from the pool in the last three months of last year.
On Saturday evening, the Swiss cabinet gathered at the Ministry of Finance in Bern to hear a series of presentations by government officials, the SNB, the Finma market regulator and representatives of the banking industry.
The government is preparing urgent measures to speed up the takeover process and plans to introduce legislation that would bypass the usual six-week consultation period required for UBS shareholders so the deal can be signed. immediately, the people said.
The framework of the deal has been designed by Swiss regulators to provide maximum stability to the country’s banking system, people briefed on the matter said. The Swiss authorities have received pre-approval from relevant regulators in the US and Europe, who are expected to issue coordinated statements today. .
UBS will significantly shrink Credit Suisse’s investment banking, so that the consolidated entity will account for no more than a third of the merged group, the two sources said.
However, the deal’s current terms sheet does not specify what will happen to Credit Suisse’s individual business divisions and only outlines a 100% takeover of the group.
Negotiators have given Credit Suisse the codename Cedar and UBS known as Ulmus, according to people briefed on the matter.
UBS is seeking concessions and protection from the government, especially from any pending legal proceedings and regulatory investigations into Credit Suisse that could result in fines or losses. , FT reported. However, it is unlikely it will receive compensation from any property damage, one of the people involved said.
UBS also wants to be allowed to meet any additional requirements it will face under global capital rules that govern the world’s biggest banks.
SNB, UBS, Credit Suisse and Finma declined to comment.
Additional reporting by Sam Jones
