Ethos says UBS should have spun off Credit Suisse’s Swiss business
Ethos, a Swiss proxy adviser, has expressed its disappointment with UBS’s decision to fully integrate Credit Suisse’s Swiss business, after the two banks announced their merger in August 2023. Ethos said that UBS should have spun off Credit Suisse’s Swiss business instead, to avoid a major systemic risk for Switzerland, an important negative impact on employment and issues for the fair competition of the Swiss financial market.
Ethos, which is composed of a number of Swiss pension funds and public utility foundations that held stakes in both groups before the merger, represents some 3%-5% of shares in the newly combined group, according to its director Vincent Kaufmann. Ethos has also backed a class-action lawsuit seeking a better price from UBS for the takeover, saying that Credit Suisse was significantly undervalued in the deal.
UBS reported a massive second-quarter financial gain related to the takeover, which it said reflected the synergies and cost savings from the integration of Credit Suisse’s Swiss business. UBS said that the deal would create a stronger and more diversified bank, with a leading position in wealth management, investment banking and asset management in Switzerland and globally.
UBS defends its strategy and dismisses Ethos’s claims
UBS has defended its strategy and dismissed Ethos’s claims as unfounded and misleading. UBS said that the spin-off option was not feasible or desirable, as it would have created a smaller and less profitable bank, with lower capital ratios and higher funding costs. UBS also said that the spin-off would have exposed Credit Suisse’s Swiss business to greater risks and uncertainties, especially in light of the ongoing investigations and litigation related to its involvement in the Archegos and Greensill scandals.
UBS argued that the merger with Credit Suisse’s Swiss business was in the best interest of all stakeholders, including shareholders, clients, employees and regulators. UBS said that the deal was fair and transparent, and that it offered a premium of 25% to Credit Suisse’s share price before the announcement. UBS also said that it was committed to preserving jobs and supporting the Swiss economy, and that it would ensure fair competition in the Swiss financial market.
Shareholders and regulators have mixed reactions to the deal
The deal between UBS and Credit Suisse has received mixed reactions from shareholders and regulators. Some shareholders have welcomed the deal as a way to create value and enhance efficiency, while others have criticized it as a low-ball offer and a risky move. Some regulators have approved the deal as a way to strengthen the stability and resilience of the Swiss banking system, while others have raised concerns about the concentration and complexity of the merged entity.
The deal is expected to close by the end of 2023, subject to regulatory approvals and shareholder votes. The combined group will operate under the UBS brand name, with its headquarters in Zurich. The group will have assets of over $6 trillion, revenues of over $60 billion, and more than 100,000 employees worldwide.
