Topline
UBS Group AG has offered to buy Credit Suisseāa rival Swiss bank facing economic uncertaintyāin a deal worth roughly $1 billion, according to several reports Sunday, as bank executives and Swiss officials sprint to contain a crisis sparked in part by the collapse of two major U.S. banks last week.
Key Facts
The Swiss government is set to announce the deal soon, according to the New York Times, with a reported goal of completing the merger before Asian markets open Monday morning.
However, the Financial Times reported there is no guarantee a deal will be reached, and Bloomberg reported that Credit Suisse pushed back on the deal because the offer was too low.
If the deal is closed, it would represent a significant discount: UBS would pay $0.27 (or 0.25 Swiss Francs) per share in stock, according to the Financial Times, compared to Credit Suisseās $2.01 share price when markets closed Friday.
The Swiss government is expected to speed the deal up by waiving the six-week-long waiting period normally required before a merger, according to the New York Times, and Swiss authorities are set to change laws to not require a shareholder vote to quicken the deal, the Financial Times reported.
UBS stipulated a 100-basis-point drop in its credit default spreadsāa measure of how much it costs to insure the bank against defaultāwould represent a material adverse change that would void the deal, according to the Financial Times.
Big Number
$54 billion. Thatās how much Credit Suisse borrowed from the Swiss National Bank on Thursday. The central bank offered to provide liquidity to Credit Suisse āif necessaryā hours earlier, but the bankās share price still slid almost 7% the following day.
Key Background
Shares of Credit Suisse have plummeted in recent weeks, and trading was halted Wednesday after the share price fell up to 21%. On Tuesday, the bank said it had suffered āmaterial weaknessā in its 2021 and 2022 financial reporting processes. In response, its biggest backer, the Saudi National Bank, said it wouldnāt buy any more shares in Credit Suisse. With the recent collapses of Silicon Valley Bank and Signature Bank in the U.S., uncertainty has spread that wider financial issues could be caused worldwideāconcerns that intensified after warning signs appeared at Credit Suisse. The bankās downturn isnāt linked to SVB and Signature, and its problems predate the current crisisāit ended the 2022 fiscal year with a loss of nearly $8 billion. The bank itself and some of its executives and advisers have also recently been linked to scandals, including fraud and failing to prevent money laundering.
Further Reading
UBS offers to buy Credit Suisse for up to $1bn | Financial Times (Financial Times)
UBS Nears Deal to Buy Credit Suisse – The New York Times (New York Times)
Credit Suisse Said to Push Back Against UBSās $1 Billion Offer (Bloomberg)
UBS Offers $1 Billion to Buy Credit Suisse (Wall Street Journal)