UBS is offering $1 billion to buy Credit Suisse

Under the deal being discussed, UBS would retain only portions of Credit Suisse’s investment bank that fill gaps either geographically or in certain product areas where UBS does not have a presence.


Francesca Volpi/Bloomberg News

UBS UBS -5.50%

Group AG has offered to buy competitor Credit Suisse CS -6.94%

for around $1 billion in a deal engineered by Swiss regulators to restore confidence in the banking system, according to people familiar with the matter.

One option would be to buy all of Credit Suisse and then spin off its local Swiss operations into an independent entity, the people said. UBS would retain Credit Suisse’s valuable wealth management business.

Discussions are ongoing and the contours of the deal could still change as UBS and Swiss regulators work out the details of the plan and to what extent the Swiss authorities would provide guarantees or backstops.

Officials want to finalize the deal before markets open in Asia, people said. Regulators have offered to waive the requirement for standard shareholder votes to expedite the sale, one of the people said.

One issue in the discussions is what cost-cutting UBS is likely to earn from Swiss authorities through measures such as job cuts, a key factor in how much UBS can afford to pay for the deal, the people said.

UBS would only retain portions of Credit Suisse’s investment bank that fill gaps, either geographically or in specific product areas where UBS does not have a presence.

The price would be a significant discount to the market value of Credit Suisse, which closed at around $8 billion on Friday. UBS would assume large unknown costs and the complexity of the integration. Some wealthy clients hold money at both banks and after a merger may choose to give some of their money to third parties for diversification purposes.

The Financial Times previously reported on the scope of UBS’s offer.

Credit Suisse’s so-called bail-in bonds are likely to be written down significantly, which some people familiar with the matter say would relieve some of UBS’s debt burden.

More to come as news develops.

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