UBS (UBS) will absorb Credit Suisse (CS) in a 3 billion CHF ($3.24 billion) all stock deal brokered by the government to prevent the latter embattled bank from failing.
"Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares," UBS said in a statement. However, this transaction means a "complete write-down) of 16 billion CHF ($17.28 billion) of Credit Suisse bonds that will become worth nothing.
The Swiss government has offered 9 billion CHF ($9.72 billion) to UBS "assume potential losses arising from certain assets that UBS takes over as part of the transaction, should any future losses exceed a certain threshold." The Swiss National Bank will also offer UBS a 100 billion CHF ($108 billion) credit line to sweeten the terms.
"[A]s far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure. Acquiring Credit Suisse’s capabilities in wealth, asset management and Swiss universal banking will augment UBS’s strategy of growing its capital-light businesses," said UBS Chairman Colm Kelleher.
Financial Times reported that the two banks had little interaction, and that the Swiss government is working on changing rules that require a six-week shareholder comment period.
Despite a CHF 50 billion (about $54 billion) loan from the Swiss government, Credit Suisse could not restore investor confidence and stave off a steep decline in its share price.
The bank has been plagued by a series of missteps in the last year, and the banking crisis that was spurred by the failure of Silicon Valley Bank did not help the bank's ailing stock price. Most recently, the firm found "material weakness" in its accounting procedures, delaying its annual report and sparking questions from the U.S. Securities and Exchange Commission.
About six months ago, the bank underwent a restructuring in an effort to shake off scandals and losses.
Clarification—March 19, 2023: More details, including the final deal number, and quotes were added as new information emerged.