Swiss authorities agreed to change the country’s regulations to bypass a shareholder vote and announce the deal over the weekend.
UBS Group agreed to buy rival Credit Suisse for $3.25 billion on March 19 under “emergency measures” to prevent uncertainty in the financial market.
A previous Financial Times report said UBS had agreed to buy Credit Suisse for more than $2 billion, citing a person familiar with the matter. However, the latest statement from UBS revealed that the consideration for the deal is about 3 billion Swiss francs, or $3.25 billion.
That’s still the largest decline in Switzerland’s March 17 market share of 7.5 billion francs, or $8 billion. “This acquisition is great for UBS shareholders but, let’s be clear, in the case of Credit Suisse, it is an emergency rescue.
We structured the transaction to preserve the remaining value of the business and limit our downside exposure,” said UBS CEO Colm Kelleher. To close the deal, Swiss officials agreed to change the country’s constitution to prevent a shareholder vote and announced the deal at the end of the week before the market opened.
Additionally, as part of the deal, the Swiss National Bank has pledged to provide UBS with more than $100 billion, according to reports. The Federal Department of Finance, the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank have started discussions, and the acquisition has their full support, UBS said in a statement.
Swiss authorities discussed alternatives to Credit Suisse if their deal with UBS falls through at the end of the week, including nationalizing the bank in full or in part as an emergency option. The Credit Suisse bailout will also include losses for those held, causing concern among European regulators that it could undermine investor confidence in the European financial sector.
UBS and Credit Suisse have been in talks with regulators since March 15, when Credit Suisse’s shareholder, Saudi National Bank, said it would not increase its investment in the Swiss bank due to regulations. A concern about the bank’s ability to turn a bigger profit from those who claim is fuelling fears about potential shareholder funds.
Credit Suisse was founded in 1856 to finance the expansion of the Swiss railways. It was considered the second largest bank in the country.
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