UBS to offer $1 billion all-share for beleaguered Credit Suisse: reports -Dlight News

UBS to offer $1 billion all-share for beleaguered Credit Suisse: reports

Swiss regulators have reportedly helped close a deal for UBS Group AG to buy rival Credit Suisse AG – an all-share deal worth $1 billion that is expected to be finalized by Sunday evening. That’s according to a report from the Financial Times on Sunday, which set the offer price at 0.25 Swiss francs per share, below Credit Suisse’s CS, -6.94% CSGN, -8.01% Friday’s closing price of 1.86 Swiss francs. Such a deal would end the days of speculation about what would happen to the troubled bank. Credit Suisse has backed away from the offer, Bloomberg reported saying the offer was too low and could hurt shareholders and employees. One possibility is for UBS to buy Credit Suisse and spin off its Swiss operations into an independent entity, The Wall Street Journal reported Sunday. UBS will retain Credit Suisse’s wealth management division, the report added, although negotiations are still ongoing. Credit Suisse’s stock has fallen 25% in the past week – the worst since the Great Financial Crisis of 2008 – and trades 71% lower than it was a year ago. Credit Suisse’s American depository receipts rose 7% late Friday, and the S&P 500 SPX, -1.10% fell 24% for the week, versus a 1.45 gain. The deal comes days after the Swiss National Bank was forced to provide a 50 billion Swiss franc ($54 billion) emergency credit line to Credit Suisse last week amid tensions in the global banking sector that began with the failure of three. US banks. Shares in Credit Suisse hit record lows in recent sessions after its biggest investor said it would not provide any more capital and the lender’s chair acknowledged that wealth management clients had continued to leave the investment bank. UBS UBS, -5.50% UBSG, -1.16% also added a clause that allows the deal to be canceled if its credit default rises by 100 basis points or more, the report said, citing four people close to the situation. In a rush to finalize the deal before markets open on Monday, Swiss regulators are trying to change a law that allows for a six-week consultation period with shareholders. Given the price on the deal, many shareholders are expected to suffer losses. Sources told the FT that US authorities are also involved in talks to merge Switzerland’s two biggest banks, which is seen as the only means of saving Credit Suisse. UK regulators were also involved. The deal price does not include any additional provisions from the Swiss National Bank to push it forward. UBS is planning to eventually represent a third of its business for Credit Suisse. But the union would still create one of the largest global systemically important financial institutions in Europe – UBS has $1.1 trillion in total assets on its balance sheet and Credit Suisse has $575 billion. Neither the bank, nor the Swiss National Bank nor market regulator Finma would comment to the Financial Times. Credit Suisse shareholders have endured a series of scandals that have resulted in five consecutive quarters of losses and an outflow of about $100 billion from its wealthy clients in the fourth quarter. The lender acknowledged material financial control problems in its annual report last week. Investors will now wait to see if a deal for Credit Suisse can calm markets and remove at least a layer of global tensions. US federal authorities on Thursday planned to inject $30 billion into First Republic Bank FRC, -32.80% and prevent a fourth banking collapse, following the failures of Silicon Valley Bank, Signature Bank and Silvergate Bank in the past week. Read: From the sudden collapse of SVB to the collapse of Credit Suisse: 8 charts show the turmoil in financial markets Still for investors is the Federal Reserve’s meeting this week. Markets brace for Tuesday-Wednesday’s policy meeting. Fed funds futures traders now see a 75.3% chance of a 25 basis point rate hike on Wednesday due to inflation concerns. Read: What it might take to calm banking sector concerns: Time and a Fed rate hike.

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