Switzerland's largest bank UBS is acquiring Credit Suisse (CS), which is on the brink of bankruptcy. The acquisition price is 3 billion Swiss francs (approximately 4.24 trillion KRW), and this acquisition will create a 'big bank' with a market capitalization in the 70 billion dollar range (about 92 trillion KRW). The Swiss government has also promised large-scale liquidity support and government guarantees to minimize the shockwaves to the global financial market.
On the 19th (local time), UBS and CS held a press conference in Bern, Switzerland, announcing that the two companies had signed a merger agreement with UBS as the surviving entity. The acquisition price per share is 0.75 Swiss francs, and CS shareholders will receive 1 UBS share for every 22.48 CS shares. This is significantly below CS's market value based on the closing price on the 17th (1.86 Swiss francs per share).
Swiss financial authorities also promised extensive government guarantees and liquidity support. The Swiss National Bank (SNB), Switzerland's central bank, has agreed to provide up to 100 billion dollars in liquidity support for this acquisition. The Swiss Treasury will also provide guarantees worth 9 billion Swiss francs to cover potential losses or legal costs arising during the integration process.
The merged entity is expected to be led by the current UBS CEO, Ralph Hamers. The integration process aims to be completed within the year, but approval from major countries' antitrust regulators remains a variable.
The merger with UBS, which Swiss financial authorities called a 'last resort,' came sooner than expected. To block the shockwaves that the bankruptcy of CS, with a market capitalization of 8 billion dollars, could have on the global financial market and to restore confidence in the stability of the Swiss banking system, authorities acted urgently over the past weekend. Due to regulatory measures that bypassed shareholder approval procedures and finalized the acquisition agreement before the Asian financial markets opened on the 20th, a 'Black Monday' is expected to be avoided.
Swiss President Alain Berset said at the press conference, "The liquidity outflows and market volatility confirmed last Friday showed that market confidence could no longer be restored, and a swift and stable solution became necessary," adding, "That solution was UBS's acquisition of CS."
Meanwhile, U.S. regulators are pushing for a breakup sale of the bankrupt SVB. According to Bloomberg, the Federal Deposit Insurance Corporation (FDIC), the bankruptcy trustee of SVB, is planning to split SVB into at least two business units for sale, and sources said the bidding schedule has also been postponed.
This decision to split the sale aims to broaden the pool of potential buyers for SVB, with the deadline for acquisition proposals set for the 24th. The FDIC had originally planned to receive bids from buyers by the 19th but shifted to a breakup sale after no suitable buyers emerged.
Separately, the FDIC is reportedly accepting bids for SVB's asset management division, SVB Private Bank, or Boston Private, until the 22nd. Boston Private is an asset management bank acquired by SVB in 2021.
However, the FDIC explained that no final decision has yet been made regarding the method and specific schedule for SVB's sale, and these may change.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
