UBS, the Swiss banking giant, has agreed to pay $35 billion in cash and stock to take over Credit Suisse as part of a rushed deal that will see the latter’s shareholders receive a 40 percent premium.
The deal was announced suddenly on Sunday evening and is expected to be completed by the end of the year. The deal is the largest ever merger in the Swiss banking sector, and the combined entity will be the country’s largest bank.
However, the move will cost UBS more than $17 billion, as it will have to pay a premium for the assets it is getting in the deal. UBS will also have to undertake a substantial restructuring of Credit Suisse, which will include a significant cost-cutting program.
UBS is hoping that the deal will help it to better compete with global banking giants such as JPMorgan Chase and Goldman Sachs, and will also give it access to Credit Suisse’s wealth management capabilities. The merger is also being seen as a way for UBS to gain scale and diversify its business.
At the same time, the deal will reduce competition in the Swiss banking sector, which could have a negative effect on the industry. UBS and Credit Suisse will together control more than 40 percent of the Swiss banking market.
Overall, the deal is likely to be a costly one for UBS, but it could also pay off in the long run if the bank is able to successfully integrate Credit Suisse’s operations and leverage its wealth management capabilities.