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UBS reached an agreement to purchase embattled Credit Suisse on Sunday for a reported $3.2 billion. The agreement came after weekend negotiations orchestrated by the Swiss National Bank and Swiss regulators, which pushed for the emergency rescue as a way to shore up confidence in the nation’s financial system.
The two banks are the largest in Switzerland and will have combined assets of roughly $5 trillion when the acquisition is completed. The deal will ensure that Credit Suisse shareholders are compensated with USB shares, at a rate of one USB share for every 22.48 shares of Credit Suisse they currently hold.
The emergency rescue plan was orchestrated after a week in which Credit Suisse share prices plunged—even after news broke that the nation’s central bank was providing a $54 billion loan to the bank. Swiss officials have noted that the UBS deal is a “commercial solution” rather than a bailout.
Even so, the central bank has reportedly committed to providing as much as $108 billion in loan monies to support the acquisition. In addition, the government of Switzerland has confirmed that it will assume as much as 9 billion Swiss francs in losses to limit UBS’ risk.
UBS Chairman Colm Kelleher emphasized the importance of the deal in a statement:
“This acquisition is attractive for UBS shareholders but let us be clear, as 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.”
