UBS agreed to buy Credit Suisse after upping its offer to more than $2 billion, with Swiss authorities set to change the country’s laws to prevent a shareholder vote on the transaction as they rush to finalize a deal before Monday.
The share deal between Switzerland’s two largest banks will be signed on Sunday evening and will be priced at a fraction of Credit Suisse’s closing price on Friday.nearly eliminating the shareholders of the target, three people with direct knowledge of the situation said.
UBS will now pay more than 0.50 Swiss francs per share on its own shares, above today’s offer of 0.25 Swiss francs, but well below Credit Suisse’s closing price of 1.86 Swiss francs on Friday. the people said.
The Swiss National Bank has agreed to offer a $100 billion liquidity facility to Credit Suisse as part of the deal, according to two people familiar with the matter.
UBS has agreed to relax a material adverse change clause that would void the deal if its credit default spreads increase, they added.
The material adverse change clause applies during the period between signing and closing the deal, the people said. Regulators and banks are working to announce the deal on Sunday night.
Some of the people criticized plans to circumvent normal corporate governance rules by preventing UBS shareholders from voting.
There has been limited contact between the two lenders and the terms have been heavily influenced by the Swiss National Bank and regulator Finma, the people said. The US Federal Reserve has given its consent for the deal to progress, they added.
Both sides have been in negotiations with regulators since Wednesday, when Credit Suisse asked the SNB to provide an emergency credit line of 50 billion Swiss francs ($54 billion).
When this backing failed to stem a slide in its share price and prevent panicked customers from withdrawing their money, the central bank stepped in to force a merger after worrying about the viability of the country’s second-biggest lender.
Credit Suisse’s deposit outflows exceeded 10 billion Swiss francs a day at the end of last week, the FT reported. Clients withdrew 111 billion Swiss francs from the group in the last three months of last year.
On Saturday night, the Swiss cabinet met at the Finance Ministry in Bern for a series of presentations by government officials, the SNB, Finma and representatives of the banking sector.
The government is preparing emergency measures to speed up the takeover and plans to introduce legislation that will bypass the normal six-week consultation period required for UBS shareholders so that the deal can be closed immediately, the people said.
The framework of the agreement has been designed by Swiss regulators to provide maximum stability for the country’s banking system, people briefed on the matter said. Swiss authorities have already obtained prior approval from relevant regulators in the US and Europe, which are expected to issue coordinated statements today.
UBS will slash Credit Suisse’s investment bank so that the combined entity represents no more than a third of the merged group, two of the people said.
Dealers have given Credit Suisse the code name Cedar and UBS is known as Ulmus, according to people briefed on the matter.
As part of the deal, the FT previously reported that UBS was seeking concessions and protections from the government, particularly from any pending legal cases and regulatory investigations into Credit Suisse that could result in fines or losses. However, it is unlikely that he will get compensation for any loss of assets, said one of the people involved.
UBS also wants to be allowed to phase in any additional lawsuits it would face under global capital rules governing the world’s biggest banks.
The deal with UBS comes just months after the Saudi National Bank and the Qatar Investment Authority injected nearly 3 billion Swiss francs into Credit Suisse as part of a 4 billion Swiss francs capital increase. They are the bank’s two largest shareholders and jointly own 17 percent of the shares.
Source: Ambito
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