UBS Group doubled down on its original offer and agreed to buy rival Credit Suisse for nearly $2 billion on March 19 in a historic deal for Switzerland’s two largest banks, the Financial Times reported.
Earlier on March 18, UBS put forward a $1 billion offer, but Credit Suisse’s board of directors rejected the deal, sources told the FT. The $1 billion offer was a significant discount from the bank’s March 17 market value of nearly $8 billion, according to Market Cap.
To close the deal, the Swiss authorities also agreed to change the country’s rules to bypass a shareholder vote and announce the deal over the weekend before markets open.
In addition, as part of the deal, the Swiss National Bank (SNB) committed to provide USB with a liquidity line worth more than $100 billion. According to the FT, the deal was heavily influenced by the SNB and the Swiss Financial Market Supervisory Authority (FINMA). U.S. and European regulators have reportedly approved the deal, with agreed-upon statements to be released later Sunday.
Swiss authorities have been considering alternatives to Credit Suisse in case the deal with UBS does not go through over the weekend, including full or partial nationalization of the bank as an emergency option.
Credit Suisse’s rescue plan will also include losses to bondholders. The move raised concerns from the European regulator that it would undermine investor confidence in Europe’s financial sector.
UBS and Credit Suisse have been in talks with regulators since March 15 after Credit Suisse’s largest shareholder, the National Bank of Saudi Arabia, said during an interview that it would not increase its investment in the Swiss bank due to regulations. The comments added to concerns about the bank’s ability to turn a profit, raising concerns about potential funding from shareholders.
Credit Suisse was founded in 1856 to finance the expansion of the Swiss railways. It was considered the second largest bank in the country.
