UBS has made an offer to acquire Credit Suisse for up to $1 billion, reported The Financial Times. The proposed deal between Switzerland’s two largest banks is expected to be signed as early as Sunday evening. However, the deal is reportedly going to be priced at a fraction of Credit Suisse’s closing price on Friday.
However, the deal, if it goes through, would involve thousands of job cuts, a Reuters report stated.
Credit Suisse has been facing a crisis of confidence following the recent collapse of Silicon Valley Bank and Signature Bank. As one of the most globally significant banks to be caught in the turmoil, Credit Suisse has been under pressure from regulators and authorities to find a solution quickly.
The proposed acquisition offer from UBS is expected to result in significant changes for both banks. The Swiss government is reportedly planning to change the country’s laws to bypass a shareholder vote on the deal, which would expedite the process of finalizing the acquisition.
UBS made an offer on Sunday morning to acquire Credit Suisse for 0.25 Swiss francs ($0.27) per share to be paid in UBS stock. This represents a fraction of Credit Suisse’s closing share price of 1.86 Swiss francs on Friday. However, the offer also includes a condition of a ‘material adverse change’, which would void the deal if Credit Suisse’s credit default spreads increase by 100 basis points or more.
The 167-year-old bank, Credit Suisse, is among the largest wealth managers in the world. As some banks struggle with the impact of rapidly increasing central bank interest rates, authorities have been racing to rescue the bank to prevent a collapse in investor confidence.
As one of 30 global banks considered to be systemically important, any deal for Credit Suisse could have significant implications for bank valuations. However, according to sources with knowledge of the matter cited by Bloomberg News, Credit Suisse is reportedly resisting the offer of up to $1 billion. The bank believes that the proposed offer is too low and that it would adversely affect shareholders and employees who hold deferred stock.
Both Credit Suisse and UBS declined to comment on the matter, and the Swiss government has yet to respond to requests for comment.
According to a Reuters report, a source familiar with the matter had earlier stated that UBS was seeking $6 billion from the Swiss government in connection with its proposed acquisition of Credit Suisse. The requested guarantees by UBS would cover the expenses of winding down certain parts of Credit Suisse and any potential litigation charges.
While the talks are ongoing, one source had cautioned that the discussions were facing significant obstacles and that up to 10,000 jobs may have to be cut if the two banks were to merge. As a result, the Swiss Bank Employees Association has called for the formation of a task force to address the employment risk.
The negotiations, which took place over the weekend, occurred against the backdrop of a tumultuous week for banking stocks and efforts in Europe and the United States to support the sector following the collapse of Silicon Valley Bank and Signature Bank.