UBS Group doubles offer and acquires Credit Suisse for $2B

UBS Group doubled its initial offer and agreed to buy rival Credit Suisse for nearly $2 billion on March 19, in a historic deal for Switzerland’s two largest banks, the Financial Times reported.

UBS had previously put a $1 billion offer on the table on March 18, but the deal was rejected by Credit Suisse’s board, FT sources said. The $1 billion offer is a big discount on the bank’s March 17 market price of nearly $8 billion, according to data from Companies Market Cap.

To seal the deal, Swiss authorities also agreed to change country regulations to bypass a shareholder vote and announce the deal over the weekend, before markets opened.

Also, as part of the deal, the Swiss National Bank (SNB) committed to provide a liquidity line of more than $100 billion to USB. According to the FT, the deal was heavily influenced by the SNB and the Swiss Financial Market Supervisory Authority (FINMA). United States and European regulators are said to have approved the deal, with a coordinated statement to be released on Sunday.

Swiss authorities are considering alternatives for Credit Suisse if the deal with UBS falls through over the weekend, including full or partial nationalization of the bank as an emergency option.

Credit Suisse’s rescue plan will also include losses for bondholders. The move has raised concerns among European regulators that it will undermine investor confidence in Europe’s financial sector.

UBS and Credit Suisse have been locked in negotiations with the regulator since March 15, after Credit Suisse’s largest shareholder, the Saudi National Bank, said during an interview that it would not increase investment in the Swiss bank due to regulations. Concerns about the bank’s ability to turn a profit have been heightened by the comments, adding to fears about shareholder funding.

Credit Suisse was founded in 1856 to finance the expansion of the Swiss railways. It is considered to be the second largest bank in the country.