- UBS is offering to pay up to $1 billion to buy Credit Suisse, the Financial Times reported.
- UBS has been in talks this weekend about buying some or all of its troubled Swiss rival.
- Credit Suisse believed the offer was too low, Bloomberg reported.
UBS is offering to pay up to $1 billion to rescue its troubled Swiss rival Credit Suisse, the Financial Times reported Sunday.
Swiss regulators plan emergency changes to regulations so it can avoid a shareholder vote on the deal to speed up the process before markets open on Monday, per the report.
The all-share deal could be finalized by Sunday night and would value Credit Suisse’s equity at far less than Friday closing value of about $8 billion, according to unnamed sources who spoke to the FT.
However, Bloomberg reported that Credit Suisse thought the offer was too low and would hurt both shareholders as well as employees with stock options, according to unnamed sources.
A deal would mean investors’ stakes in the bank are close to worthless. Its two biggest shareholders are the Saudi National Bank and the Qatar Investment Authority, which have a combined stake of 17%.
Bloomberg also reported that a partial or full nationalization of Credit Suisse was being considered as the only other option to a takeover by UBS if a deal cannot be agreed by late Sunday night, when Asian markets open. The Swiss finance ministry declined to comment to the outlet.
The amount of cost-cutting Swiss regulators would permit UBS to do through steps such as axing jobs will influence how much it can afford to pay, The Wall Street Journal reported. Credit Suisse was already eliminating about 9,000 roles from its workforce of just over 50,000.
Options for UBS could include retaining Credit Suisse’s lucrative wealth-management operations, retaining only certain parts of its investment bank, and spinning off its Swiss domestic operations, per the Journal.
UBS is also negotiating backstops and guarantees from Swiss regulators and may want a clause that would void a deal if markets deem it to be too risky and send the cost of its default protection soaring.
Mohammed El-Erian, chief economic advisor to Allianz, described the deal to BBC News as a “shotgun wedding” to stop a potential “death spiral” for Credit Suisse.
UBS was considering whether to acquire part or all of Credit Suisse on Friday, the FT first reported. The Swiss National Bank and Swiss regulators brokered talks in a bid to restore confidence in the country’s banks and regarded a merger as their “plan A,” per the newspaper.
The rescue deal comes a week after Silicon Valley Bank collapsed, which had a ripple effect through the banking sector and rattled investors who feared other banks could follow suit.
Shares in Credit Suisse fell dropped 24% on Wednesday after its largest shareholder, Saudi National Bank, warned it wouldn’t be able to invest more cash in the bank because of regulatory hurdles.
On Thursday it secured a $50 billion lifeline from the Swiss National Bank and its shares jumped by a fifth, only to drop a further 8% on Friday.
UBS, Credit Suisse and the SNB declined to comment to the FT and did not immediately respond to requests for comment from Insider.