Mar 20, 2023 - Economy & Business

UBS-Credit Suisse deal shows that shareholders are no longer in charge

An illustration of the world as a cracked piggy bank.

Illustration: Sarah Grillo/Axios

UBS yesterday agreed to buy troubled Swiss banking rival Credit Suisse, in a $3.2 billion deal whose speed was unthinkable before Silicon Valley Bank's collapse.

Why it matters: The Swiss government literally changed the law to get the deal done, creating short-term stability for the global banking sector but long-term questions about shareholder rights.

  • In any acquisition of a publicly traded company, the acquired company's stockholders have the right to vote their shares in favor or disapproval.
  • Credit Suisse shares are listed in both New York and Zurich, but the Swiss government unilaterally moved to eliminate the voting rights.
  • It's an unprecedented decision. During the great financial crisis, for example, Bear Stearns shareholders voted to approve its government-desired takeover by JPMorgan (even getting a better deal in the process).

What they're saying: "This feels like Russia in Zurich," says a source close to Credit Suisse. "You've got Swiss families who have invested a lot in Credit Suisse basically getting wiped out without a say."

  • But, but, but: Credit Suisse shareholders do make out slightly better in this deal than do bondholders, which isn't usually the case.

The bottom line: UBS buying Credit Suisse is a shotgun wedding, insisted upon by a Western, capitalist country. The question now is if it sets a precedent for other countries to follow, and how investors would react to losing one of their most fundamental rights.

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