UBS's board and a strategy committee had each assessed a possible takeover of rival Credit Suisse before its state-backed rescue and concluded in February a deal was not desirable due to its rival's business performance and risks around valuation and potential liabilities, a regulatory filing showed.
UBS agreed to buy Credit Suisse on March 19 for SFr3bn (US$3.36bn) in a shotgun rescue backed by Swiss authorities. UBS chairman Colm Kelleher said at the time that UBS had not initiated talks to buy Credit Suisse but regulators had urged it to step in to preserve stability in Swiss banking and global finance.
An SEC filing by UBS, dated April 26, provided further insight on how the deal played out, and showed the bank had been watching Credit Suisse for five months but remained wary. Between October and February an ad hoc UBS strategy committee and its board reviewed developments at Credit Suisse, and its management made a preliminary assessment on December 19 of the implications that a transaction with Credit Suisse would have, in case UBS was approached to help rescue it, the filing said.
"Subsequently, in a meeting of February 20, 2023, the strategy committee, and in a meeting on February 22, 2023, the board of directors, each concluded that an acquisition of Credit Suisse was not desirable for UBS Group but that further analysis was necessary in order to prepare for a scenario where Credit Suisse was in serious financial difficulties," the filing said.
"In reaching this view, the strategy committee and the board of directors considered the uncertainty of establishing a reliable valuation of Credit Suisse, recent business performance and risks of Credit Suisse, further potential liabilities and transaction uncertainty," it added.
The filing showed the UBS board asked management to monitor developments at Credit Suisse and to assess measures through which UBS‘s concerns could be addressed in case it had to rescue its rival.
From January to mid-March, teams including UBS staff, advisers from Morgan Stanley and external legal advisers carried out financial analysis and assessed potential legal structures and measures to address UBS's concerns in case the Swiss government wanted it to support a takeover of Credit Suisse. UBS said it also assessed the potential impact should Credit Suisse go into resolution.
On March 15, as Credit Suisse's financial health deteriorated, Swiss government representatives told UBS that an orderly takeover by UBS would be the best option, and asked if it was willing to consider a deal, the filing showed. The next day UBS and its advisers started limited but intensive due diligence to assess risks and implications.
On the weekend of March 18–19, UBS increased what it was prepared to pay to Credit Suisse shareholders to SFr3bn from about SFr1bn, the filing said. UBS and Swiss officials also negotiated a guarantee for the government to cover and share losses on certain non-core assets. The boards of UBS and Credit Suisse subsequently approved the takeover.
A "Special Ordinance" issued by the government on March 16 also said Swiss regulator Finma could order Credit Suisse to write down the principal and interest of its Additional Tier 1 securities, the filing showed, which the bank subsequently did in a move that surprised investors.
The filing showed Credit Suisse shareholders will own about 5.1% of shares in the enlarged UBS, and UBS shareholders will own the remainder.
The filing said the takeover still needs regulatory approval in the European Union, India, Japan, Mexico and South Korea.