UBS (NYSE:UBS) stepped in to save Credit Suisse through its acquisition, but did it pay below market value for the acquisition? The response appears to be yes, as indicated by hundreds of Credit Suisse’s equity shareholders and former employees, as reported by the Financial Times.
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UBS paid over $3 billion to buy Credit Suisse, which was less than half of the market value of the crisis-hit bank before the agreement was reached. Indeed, the deal came at compelling financial terms for UBS, noted the company’s board. Commenting on the transaction, UBS’ Chairman Colm Kelleher said it is attractive for UBS’ shareholders. However, he added, “as far as Credit Suisse is concerned, this is an emergency rescue.”
Given the necessity of the rescue, the amount UBS paid for the acquisition resulted in significant losses for both Credit Suisse’s retail investors and bondholders. They have seen their value wiped out and are pursuing lawsuits against the deal. While the outcome of these lawsuits remains to be seen, the Credit Suisse rescue transaction certainly boosted UBS’ competitive positioning.
UBS Strengthens its Competitive Positioning
The business combination that came at the behest of the Swiss government is a win for UBS’ shareholders. The deal created a business with over $5 trillion in total invested assets. Thus, it significantly boosted UBS’s competitive position in the domestic market, making it a leading global wealth manager with operations across the most attractive growth markets.
In addition, the combination of UBS and Credit Suisse created a leading asset manager in Europe, with invested assets of over $1.5 trillion.
Back in March, UBS said that the firm anticipates the transaction to be EPS accretive by 2027. Moreover, it would generate annual cost reductions of over $8 billion by 2027.
Is UBS a Good Stock to Buy Now?
On June 12, UBS completed the acquisition of Credit Suisse and said that the combined entity would operate as a consolidated banking group. Meanwhile, analysts remain cautiously optimistic about the stock.
With seven Buy, three Hold, and one Sell recommendations, UBS stock has a Moderate Buy consensus rating on TipRanks. At the same time, analysts’ average price target of $26.31 represents a 12.63% upside potential from current levels.
