UBS Group AG had no choice but to take control of its competitor Credit Suisse Group AG in a rushed and unwanted operation, at a time when the global banking crisis worsened Credit Suisse’s finances and prompted authorities to take urgent action, according to a document.
In a brief filed Tuesday with the US Securities and Exchange Commission (SEC), UBS told investors that he had less than four days to complete the purchase given the “emergency circumstances.” It is estimated that the acquisition will have a negative impact of about US$17,000 million.
A series of Credit Suisse problems spooked clients into withdrawing their money, a trend that accelerated as US bank failures sparked fears of a broader banking crisis.
The wave of deposit outflows and a significant drop in share prices prompted the Swiss central bank to offer liquidity assistance to Credit Suisse on March 15.
The following day, UBS and Credit Suisse signed a confidentiality agreement under which the former initiated due diligence, according to the UBS file.
On March 19, the Swiss National Bank announced that UBS would buy Credit Suisse for 3 billion Swiss francs ($3.4 billion) in shares and would take a loss of up to 5 billion francs from the liquidation of part of the business. The final price was raised from the initial 1 billion francs, according to the notification.
UBS’s interest in buying Credit Suisse began in October, when its board’s ad hoc Strategy Committee examined its competitor’s plight, according to the notice.
Then, Credit Suisse was experiencing deposit and net asset outflows at levels substantially above rates for the July-September quarter, UBS said.
In early December, UBS management undertook a preliminary assessment of the consequences of a Credit Suisse purchase, which it presented to the Strategy Committee on December 19.
In February, both the Strategy Committee and the Board of Directors concluded that an acquisition was “undesirable” and recommended further analysis to prepare for a scenario in which Credit Suisse was in such difficulty that regulators could ask UBS to intervene.
UBS said it carried out financial analyzes from January to mid-March and assessed possible legal structures and possible steps to address concerns, as well as any negative impact to itself, should authorities propose an acquisition.
From December to mid-January, Credit Suisse executives had also been discussing with the government their options, including a merger with UBS, according to the UBS filing.
Source: Ambito
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