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UBS to buy Credit Suisse in $3.25bn deal

GENEVA, March 20, 2023

Switzerland’s biggest bank, UBS, will buy its ailing rival Credit Suisse in an emergency rescue deal aimed at stemming financial market panic unleashed by the failure of two American banks earlier this month.
 
Credit Suisse and UBS entered into a merger agreement on Sunday following the intervention of the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss Financial Market Supervisory Authority Fimna, said a statement.
 
UBS will be the surviving entity upon closing of the merger transaction. 
 
Under the terms of the merger agreement all shareholders of Credit Suisse will receive one share in UBS for 22.48 shares in Credit Suisse. 
 
UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed on Friday, a CNN report said. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday. Owners of $17 billion worth of “additional tier one” bonds — a riskier class of bank debt — will lose everything, Swiss regulators said.
 
Until consummation of the merger, Credit Suisse will continue to conduct its business in the ordinary course and implement its restructuring measures in collaboration with UBS, said a press statement. 
 
The Swiss National Bank will grant Credit Suisse access to facilities that provide substantial additional liquidity. 
 
On March 19, Swiss Federal Department of Finance, the Swiss National Bank and Finma asked Credit Suisse and UBS to enter into the merger agreement. Pursuant to the emergency ordinance which is being issued by the Swiss Federal Council, the merger can be implemented without approval of the shareholders. The consummation of the merger remains subject to customary closing conditions, it said.
 
For the purpose of a seamless integration of Credit Suisse into UBS, UBS is expected to appoint key personnel to Credit Suisse as soon as legally possible.
 
UBS has expressed its confidence that the employment of the staff of Credit Suisse will be continued.
 
On Sunday, Credit Suisse has been informed by Finma that it had determined that Credit Suisse’s Additional Tier 1 Capital (deriving from the issuance of Tier 1 Capital Notes) in the aggregate nominal amount of approximately CHF 16 billion will be written off to zero.
 
In consideration of the unique circumstances affecting the Swiss economy as a whole, the Swiss Federal Council is issuing an emergency ordinance (Notverordnung) tailored to this particular transaction. Most importantly, the merger will be implemented without the otherwise necessary approval of the shareholders of UBS and Credit Suisse to enhance deal certainty.
 
Axel P Lehmann, Chairman of the Board of Directors of Credit Suisse, said: “Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome. This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.” - TradeArabia News Service



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