Financial Services major UBS is set to acquire rival bank Credit Suisse in a $3.25bn deal as it hopes to help prevent a banking crash.
UBS stated this deal would help “secure financial stability and protect the Swiss economy,” according to a report from CNN.
The $3.25bn price tag is around 60% lower than the bank was worth when the markets closed on Friday.
The report claims that most of Credit Suisse’s shareholders will largely be wiped out. They will receive around 0.76 Swiss francs for shares – these were worth 1.86 Swiss francs on Friday. Owners of $17bn worth of additional tier one bonds will lose everything, it said.
To make the deal smoother, the Swiss federal council will issue an emergency ordinance to circumvent any regulatory or governance hurdles. This acquisition deal will not need to be approved by shareholders.
Confidence in Credit Suisse took a hit last week after it acknowledged a “material weakness” in bookkeeping. Shares dropped by 25% and account holders were withdrawing deposits of up to $10bn each day. The Swiss National Bank issued a $54bn emergency loan to stop the collapse. While this failed to prevent the collapse, Swiss officials said it allowed enough time for the UBS rescue deal to form.
Speaking about the deal, UBS chairman Colm Kelleher said, “This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. It is absolutely essential to the financial structure of Switzerland and … to global finance.”
The emergency takeover deal was agreed after several days of negotiations, which included financial regulators in Switzerland, the US and UK.
The financial market is trying to avoid the major crash, with several prominent banks hit troubled waters.
Last week, Silicon Valley Bank became the largest bank to collapse since 2008. The collapse saw HSBC buy Silicon Valley Bank UK for £1, protecting the thousands of startups in the UK that have accounts with the bank.
Signature Bank was another casualty of the troubled market. US regulators shuttered the bank under a “systemic risk exception.”
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