UBS Group AG (NYSE: UBS) has agreed to acquire its struggling rival Credit Suisse Group AG (NYSE: CS) for $3.2 billion – a “commercial solution” aimed at helping the latter pull out of the ongoing turmoil.
Here’s what we know so far
The all-stock deal that will replace every 22.48 shares of Credit Suisse with one share of UBS is set to close by the end of the year. According to Colm Kelleher (UBS Chairman):
This acquisition is attractive for UBS shareholders but, as far as Credit Suisse is concerned, this is an emergency rescue. We’ve structured a transaction which will preserve the value left in the business while limiting our downside exposure.
The stock market news arrives shortly after Credit Suisse secured a $54 billion loan from the Swiss National Bank (read more). But that failed to calm investors and its shares crashed further to under $2.0 this past Friday.
Could the agreement still fall apart?
Together, the joint bank will have invested assets worth about $5.0 trillion. Kelleher also confirmed that backing out of the said transaction was not an option.
We’re committed to making this deal a great success. There are no options in this. This is absolutely essential to the financial structure of Switzerland and to global finance.
Also on Sunday, the Swiss National Bank announced up to a $108 billion loan to support the merger that could result in significant layoffs and does not need shareholder approval.
Credit Suisse ended last year with roughly $572 billion on balance sheet – twice what Lehman Brothers had when it collapsed.