Credit Suisse investor group seeks better UBS takeover price: Report

A Swiss proxy adviser representing a former Credit Suisse shareholders has backed a class-action lawsuit seeking a better price from UBS for its takeover of its cross-town rival, according to a report by news agency Reuters on July 4. Ethos Foundation, which represents a Swiss pension funds that owned more than three per cent of Credit Suisse, "has decided to support the Lausanne-based legal start-up LegalPass in its legal action against the exchange ratio set in the context of the acquisition of Credit Suisse by UBS," it said in a statement.

Under the deal, sealed last month, Credit Suisse shareholders were offered one UBS share for 22.48 Credit Suisse shares, valuing the stricken bank at 3 billion Swiss francs or $3.35 billion. Just 48 hours before deal was struck, Credit Suisse was worth 7 billion francs, said Ethos. If successful, all Credit Suisse shareholders would benefit from the new exchange ratio, as per the report.

Also Read: UBS takes over Credit Suisse: 10 things to know about this historic deal

The case is the latest legal battle prompted by the emergency takeover, with holders of Credit Suisse's Additional Tier 1 bonds - which were all written down to zero - also claiming compensation. A group of Credit Suisse AT1 bondholders has also filed a class action suit accusing former executives at the Swiss bank, including three past CEOs, of being responsible for the bank's downfall.

The LegalPass claim comes under the Swiss mergers act which allows for a "verification of the exchange ratio" that enables shareholders to claim "adequate compensation" for their shares, LegalPass said last month.

The aim is to enable shareholders to obtain cash compensation corresponding to the difference in value between the share price determined in the merger contract and the price determined by the court.

Ethos has previously raised concerns about how the acquisition of Credit Suisse by UBS was carried out, particularly that the deal was forced through without consulting shareholders.

"Since (Swiss financial regulator) FINMA has decided to withdraw shareholders' voting rights, the only way to challenge the exchange ratio is to go court, as LegalPass intends to do," said Vincent Kaufmann, chief executive of Ethos.

Launching the claim last month, LegalPass said UBS's acquisition of Switzerland's second biggest bank was a "steal" with UBS document valuing the Credit Suisse business at almost $34 billion, according to the report.

"Credit Suisse was sold below its market price during secret negotiations and under governmental pressure, all without shareholders having any say in that matter," said Alexandre Osti, a lawyer at LegalPass. LegalPass has set a of July 20 deadline to joining the class action, the report added.

UBS takeover followed the collapse of two large US banks in March 2023 that spurred a frantic, broad response from the US government to prevent any further panic.

As part of the deal, approximately 16 billion francs or $17.3 billion in Credit Suisse bonds will be wiped out. European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of distress. But these bonds are designed to be wiped out if a bank’s capital falls below a certain level, which was triggered as part of this government-brokered deal.