UBS offers to buy Credit Suisse for up to $1B

https://www.ft.com/content/ec4be743-052a-4381-a923-c2fbd7ea9cfd

180 114 3 years ago

The offer was communicated on Sunday morning with a price of SFr0.25 a share to be paid in UBS stock, far below Credit Suisse’s closing price of SFr1.86 on Friday, the people said

1/7 of the Friday closing price - this is heading into the Matt Levine "we will buy your bank, make sure that all your customers are made whole, and give you a Snickers bar in exchange for 100% of the equity" territory

sys42590• 3 years ago

To be frank even that very low buying price together with the 6 billion CHF that UBS asked from the Swiss government as a warranty is not enough to cover for the almost unlimited amount of money they may lose in Credit Suisse related US class action and other liability related lawsuits due recent and not so recent events.

mdasen• 3 years ago

That's likely why the offer is so low. The $1B doesn't go toward covering any potential losses. The $1B would go to Credit Suisse shareholders and then UBS would own the company and be on the hook for the liabilities. To put it another way, the deal's complete price is $1B in cash plus whatever the liabilities are.

HWR_14• 3 years ago

In the US the government can step in and force you to take that offer. Specifically, they can tell you if you don't accept it the FDIC can take over your bank and auction it off for maybe the snickers bar.

Is there such a mechanism in Switzerland? Because at "a snickers bar", a lot of people wouldn't sell out even though it's better for all their depositors. They may be tempted to roll the dice and hope for a giant win. After all, they get way more upside and it's not their money (primarily) they are risking

andylynch4• 3 years ago

In practical terms no - UBS is by far the largest Swiss bank followed at some distance now by Credit Suisse, and together they are on quick look larger by asset size then all other Swiss banks _combined_.

H8crilA• 3 years ago

Whether or not a company is bankrupt is not and should not be decided by the shareholders. If it was decided by them they would obviously never declare it bankrupt.

The mechanism for "getting paid with a snickers bar" is just a streamlined but still fair version of a restructuring bankruptcy. In a bankruptcy all of the equity gets wiped out and the shareholders no longer have a say in the matters. Morally because they failed to run the company, but also because they positioned themselves to take the greatest gains, and thus should be exposed to absorb the greatest losses. It's not so much specific to any country as it is to the very idea of capitalism / being a shareholder.

The fact that a banking regulator gets involved and orders this or that does not necessarily change the fundamental way in which things would happen to another non-bank corporation. Equity would get wiped out, sometimes together with the least secured credit - see "fulcrum security".

drexlspivey3• 3 years ago

Current market cap $7B, one year ago $30B. The largest shareholder who owns 10% of the company was asked if he was going to put up more cash last week and he categorically said he won't. This arguably started/accelerated the fall, he probably regrets that now.

jasode• 3 years ago

The largest shareholder who owns 10% of the company was asked if he was going to put up more cash last week and he categorically said he won't. This arguably started/accelerated the fall, he probably regrets that now.

All-In Podcast said that a plausible reason for the Saudi Arabian investor capping at 9.9% was due to government regulations. Deep link : https://www.youtube.com/watch?v=yYwfiqYocc0&t=11m20s

That said, I have no idea if the government rules about owning more than 10% is just a minor inconvenience or A Really Big Deal.

HlessClaudesman• 3 years ago

"Credit Suisse has spent the last decade finding astonishing new ways to lose money and embarrass itself (...) It's failings have included a criminal conviction for allowing drug dealers to launder money in Bulgaria, entanglement in a Mozambique corruption case, a spying scandal involving a former employee and an executive and a massive leak of client data to the media, (...) not to mention its losses on the Archegos and Greensill scandals."

Matt Levine is a treasure.

revelio3• 3 years ago

The spying scandal didn't involve "an executive" and "a former employee", it involved the CEO and several senior executives. Tidjane Thiam resigned in 2020 over it whilst denying wrongdoing, and was CEO at the time a lot of these problems built up.

paxys• 3 years ago

Nothing too surprising here. Just the Swiss being Swiss.

tootie• 3 years ago

Headline just updated to say a deal was done at 0.50 (a bit over $2B)!

rspoerri• 3 years ago

The official number from the press conference is 3 billion Swiss Franks (CHF).

newaccount20232• 3 years ago

CS would be insane to accept that price

Their CEO can just turn this into a game of chicken, since it is the depositors who are at risk, not him

And if the sale is being forced, why even offer $1 billion? Just threaten jail time and take CS for free

markus_zhang• 3 years ago

I think you cannot say that in public (jail time)

xwolfi5• 3 years ago

CS is already worthless, there s no upside for UBS at all, except to keep their swiss charter because the gov threaten them...

drexlspivey3• 3 years ago

UBS has offered to buy Credit Suisse for up to $1bn, with Swiss authorities planning to change the country’s laws to bypass a shareholder vote on the transaction as they rush to finalise a deal before Monday.

They don't get to say no

newaccount20232• 3 years ago

Then CS should force the price to $0 and let their shareholders vent fury on regulators

Once again, it makes sense for CS to let this go scorched-earth

rrgok• 3 years ago

I don't understand, can the government change the law as they wish any time they wish? The last I heard, Switzerland is a democracy.

moneywoes• 3 years ago

What an insult

rafaelturk• 3 years ago

indeed. but reality sucks.

mikl• 3 years ago

Given how much of a shit-show Debit Suisse has been lately, I’m not sure I’d buy them, even for 1 billion Zimbabwe dollars. Who knows how many more skeletons those closets contain?

xwolfi5• 3 years ago

And UBS has its own issues to deal with as well.

neural_thing2• 3 years ago

"UBS has also insisted on a material adverse change that voids the deal if its credit default spreads jump by 100 basis points or more, they added."

Sounds like they want a way out of this deal.

neural_thing2• 3 years ago

And now Credit Suisse is pushing back on the deal. Is anyone else reminiscing?

https://www.nytimes.com/2008/03/24/business/24deal-web.html

monkeydust• 3 years ago

That's not much given recent volatility in their spreads, a further bargaining tool I guess

riffraff• 3 years ago

Worth noting that UBS itself was propped up by the swiss government during the great financial crisis (tho I think the government/central bank ended up profiting from the deal).

xwolfi5• 3 years ago

Ofc they profitted, it was a loan, like in the US, so with interest. I like how american hairdressers who barely pay a dime of tax like to vehemently point the finger at the mean banks "they" "bailed out", but no tax money has been lost in these loans...

ourmandave• 3 years ago

The hairdressers are complaining the tax payer had to front them in the first place.

The Fed's got our back, lets try crypto and see how that goes.

Just have to repeal that pesky Dodd-Frank thing, and it's back to the fuckery.

cjbgkagh• 3 years ago

Tax funded bail outs are never at fair market value, if they were the market would have done the bail out. Giving a risky venture low interest loans is the same as giving them free money.

jeffrallen• 3 years ago

Credit Suisse is such an embarrassment, the Swiss government should buy it just to take the "Suisse" out of its name.

almog2• 3 years ago

For perspective, Credit Suisse market cap is (on paper at least) around $8 bln.

RandomLensman• 3 years ago

Is or was, i.e., is there a market today beyond UBS' offer?

andylynch4• 3 years ago

I would be surprised, that almost certainly would involve nationalisation, or the SNB approving the sale of Switzerland’s second largest bank to a foreign buyer. Though I could see it being split up and maybe the IB going abroad.

almog2• 3 years ago

That number is based on its Friday closing price of total shares outstanding times the market price of a common share.

Such offer by itself would probably be enough to drive the share price given where things seems to be headed.

cowl3• 3 years ago

For even more relevant perspective, the Market Cap one year ago was 30bln. Given that they went from 30 to 8 in one year, is it suprising that they go from 8 to 1 in one month?

loeg5• 3 years ago

Yes! Huge deviations from the current market cap are always surprising! If the market expected them to go to $1B in a month, the current market cap would not be $8B.

fithisux• 3 years ago

OK, now I feel very safe. Thank you UBS you stepped in with you professional halo effect. Thanks!!! Appreciated!!! I feel very super extra safe now!!!!

xwolfi5• 3 years ago

What are you saying exactly? That UBS should just refuse ?

antibasilisk• 3 years ago

No, he's saying that this is an alarming situation

marban• 3 years ago

Definitely a better deal than Twitter.

fairity• 3 years ago

Credit Suisse needs to get another party to the negotiating table. Time is working against them and UBS has all the leverage. Low-balling makes sense if you’re CS’s only option.

xwolfi5• 3 years ago

The gov doesnt want foreigners, and UBS is the only bigger bank there. And CS is worthless anyway, the brand is just toxic, so the price will never be higher. They lost last year the same as what UBS made. If they merge and nothing changes, you have 130 000 employees working towards making 0 profit.

ethbr0• 3 years ago

If they merge and nothing changes, you have 130 000 employees

It'll be curious what the Swiss government does about employee retention in the forced marriage.

mpweiher• 3 years ago

If you look at the article, UBS does not want this deal. The Swiss government is effectively forcing them to buy.

So the chances of there being another interested party are ... low.

swarnie• 3 years ago

Ooof, i've lost a considerable amount of money lol

fancyfredbot• 3 years ago

Let's just have one bank and be done with it.

seydor2• 3 years ago

bitcoin?

drdrey• 3 years ago

what about a bank where you can get a loan?

lordnacho2• 3 years ago

I suspect the problem is they don't actually know what they are buying. Not every financial institution has reporting systems that are, how should we say it, modern.

When I worked with CS they had a mountain of corporate entities. Just dozens of businesses that were pretty hard to do paperwork for, and even as a going concern it was confusing. Now with bankruptcy eminent, it is not any easier to know what is where.

I get this feeling they actually have no idea what CS has in terms of assets and liabilities. This is why UBS has that clause about the CDS, if they buy the bag of junk there could be some bomb inside it.

busterarm• 3 years ago

I remember a couple of decades ago when my brother was working for JPMC. At the time they were an amalgamation of 13 or so large regional banks. They maintained the systems and the departments (like IT, etc) for all of the separate banks and had long-term plans to unify everything that never made any progress. Each banks' departments realized that if they did the work laid out for them that the axe was to follow so they all delayed and delayed and delayed and fought with each other for relevance.

My brother was brought in to work exclusively on backups and to wrangle 13 different IT teams doing backups into compliance. They made sure that he didn't get his laptop to start doing his job for a full six months. Every department's backups failed every day. Every department had excuses for not being able to do the remediation work. After a couple of years of collecting a paycheck and making no progress he left and used the money to start his own business.

I still wonder how much progress they have made to this day.

zabzonk• 3 years ago

Would not the prices of their office buildings/leases be worth this alone, given they will be all in major financial hubs? Do they actually have any liquidity?

NotYourLawyer• 3 years ago

You’re just looking at assets. Don’t forget liabilities.

samstave2• 3 years ago

And all the laundering/corruption they have been hiding.

God, this world has so many corrupt companies in it.

tezza• 3 years ago

And liabilities which may manifest in weird and expensive ways.

Like the London Whale (£3Bn??) for JP Morgan and countless other examples

arkad• 3 years ago

It's funny how this is a common fallacy. I thought exactly the same when Barings Bank was sold for one British Pound back in 1995 [1].

[1] https://www.investopedia.com/terms/b/baringsbank.asp

kgwgk2• 3 years ago

They are not buying the buildings alone. They are buying loads of debt as well - and other assets which may or may not be enough to cover the debts.

Ekaros3• 3 years ago

And unlike SVB, they are actually one of the players in derivative market. And whatever goes on there. And multipliers in there are big compared to their value as company.

newsclues• 3 years ago

Are these banking issues tied to the Russia-Ukraine Conflict?

Will the Swiss start selling arms to the Ukraine to make up for this lost capital?

hestefisk• 3 years ago

Unlikely.

andylynch4• 3 years ago

No. CS has had serious problems for many years.

Ekaros3• 3 years ago

Only so much as inflation is tied to that. I think it is just that the globally economy was pumped up and now things are forced to slow and free money is not available anymore. Thus things get real. And you can't hide your messes under expanding credit anymore.

seydor2• 3 years ago

Credit Suisse says no . beggars can be choosers

ar9av• 3 years ago

Imagine being Saudi Arabia's National Bank

Saudi Arabia's National Bank, which acquired 9.88% of Credit Suisse shares last year, said it would not buy more shares on regulatory grounds.
"We cannot because we would go above 10%. It’s a regulatory issue," Saudi National Bank chairman, Ammar Al Khudairy said on the sidelines of a conference in the Saudi capital, Riyadh, on Wednesday.
Al Khudairy said the value realisation of that investment will unfold as the Swiss bank proves they are doing the turnaround.
"We are happy with the plan, the transformation plan that they have put forward. It is a very strong bank," he said.
"I don't think they will need extra money; if you look at their ratios, they're fine. And they operate under a strong regulatory regime in Switzerland and in other countries," he told the Reuters news agency.

His comment will go into the history books for shutting up when your money is on the line.

belter• 3 years ago

Next... Luxembourg AAA Rating...

mcintyre1994• 3 years ago

Looks like they paid about $1.5 billion for that stake last year if anyone's interested! https://www.cnbc.com/2022/10/31/credit-suisse-shares-are-a-s...

somedude895• 3 years ago

>Saudi Arabia's National Bank, which acquired 9.88% of Credit Suisse shares last year, said it would not buy more shares on regulatory grounds.
His comment will go into the history books for shutting up when your money is on the line.

He didn't just say "for regulatory reasons." He started with "Absolutely not" and it almost sounds like he added the regulatory part because he realized he screwed up: https://youtu.be/q0So9sqLLfY?t=127

Alifatisk• 3 years ago

What’s the reason of acquiring 9,88% instead of 10%?

safeimp• 3 years ago

https://www.investopedia.com/terms/p/principal-shareholder.a...

Pasting the key takeaways portion:

- A principal shareholder is a person or entity that owns 10% or more of a company's voting shares.
- Principal shareholders have significant influence over a company, allowing them to vote on appointing the (CEO) and board of directors.
- A principal shareholder is different from a majority shareholder, which is a person or entity that owns 50% or more of a company's shares. Principal shareholders are subject to special Securities and Exchange
- Commission (SEC) filing rules that pertain to insider trading.

m3kw9• 3 years ago

This is like a high leverage option trade except there is both unlimited downside and upside.

sschueller2• 3 years ago

Latest news indicates that CS has rejected the deal.

At this point if there is no deal by the end of the day the government is considering taking parts or the entire bank[1]. Although this would be a huge hit for the tax payer, at this point I think it would be much better. The Swiss government can also push back harder on any future liabilities that come at the bank from old dealings. By nationalizing the bank they will effectively prevent a global financial crisis.

If UBS acquires this bank a lot of jobs are redundant and there is effectively only one large bank left.

The Bundesrat[2] is expected give a media conference later today.

[1] https://www.bloomberg.com/news/articles/2023-03-19/switzerla...

[2] https://www.youtube.com/@gov-ch/streams

andylynch4• 3 years ago

I just hope the combined entity’s name is a variant of ‘United Swiss Bank Corporation’ not already used by one of its predecessors!

aobdev• 3 years ago

USB-C?

sschueller2• 3 years ago

SKA, then my hat[1] will be relevant again. Also the gold signage on the building windows[2] would be correct again (can't be removed because of historic protection).

[1] https://cdn.unitycms.io/images/19gT0AyGKZW9w8bI-N6GQe.jpg

[2] https://www.cash.ch/fp/1335/751/2016/1512/sites/default/file...

Redoubts• 3 years ago

Why is this better than parting up the company in bankruptcy court or receivership? (Or whatever the Swiss analog is).

kgwgk2• 3 years ago

With this tomorrow will be business-as-usual. Much more than in any other alternative, at least.

lordnacho2• 3 years ago

Because in a bankruptcy stuff stops. Everyday processes get interrupted, and the administrator needs to tally up the balance sheet and sell off what they can to creditors.

It's not just some widget factory, it has connections all over the world but ofc also quite a lot in Switzerland itself. You don't really want one of your two biggest banks to cease trading.

curiousgal• 3 years ago

Not to mention the CDS/Structured credit market frenzy that would ensue.

JCM9• 3 years ago

UBS is basically buying an abandoned storage locker at this stage. At this point Credit Suisse is mostly junk and may be worthless but UBS might be able to find a few things of value in there to make it worth their time and money.

Sad to see such a long-standing global company end like this. Credit Suisse suffered from years of terrible leadership and bad decisions so I suppose this is preferable to just an outright collapse.

Jenk2• 3 years ago

$1b for Credit Suisse feels like they already did collapse and UBS are making an offer for the rubble.

baskethead2• 3 years ago

It's buying an abandoned storage locker with potentially leaking chemical waste that has could have been poisoning the ground water and killing people the next town over for decades.

psychlops• 3 years ago

"Swiss authorities poised to change the country’s laws to bypass a shareholder vote"

This part of the article is horrifying.

alex_suzuki• 3 years ago

As a Swiss citizen, I wholeheartedly agree.

HDThoreaun• 3 years ago

Has to mean CS is facing eminent collapse right? Or maybe they’re just worried shareholders would reject in hope of a miracle since they dont suffer in the downside.

Animats• 3 years ago

This seems so out of character for Switzerland. Would anyone from Switzerland care to comment?

Switzerland has bank insurance, but it's not government-backed. It's funded by the banks as a group. The limit is 100,000 CHF (about US$108,000) per customer. Swiss banks are not, in general, backed up by the Swiss government in the way that the FDIC and Fed back up US banks. It's surprising to see a "too big to fail" approach from Switzerland.

But if Switzerland let Credit Suisse go under, nobody outside Switzerland would put money in Swiss banks any more.

JumpCrisscross• 3 years ago

if Switzerland let Credit Suisse go under, nobody outside Switzerland would put money in Swiss banks any more

Switzerland’s private banks are fine. Problem is CS does a lot of plumbing, in Switzerland and internationally.

j_mo• 3 years ago

Two duplicates of this on the front page of HN, annnddd both are behind paywalls :(

gtsnexp• 3 years ago

This marks the first instance in history where the Swiss government has utilized a financial backstop to restore confidence in the international financial market.

UBS offers to buy Credit Suisse for up to $1B

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