‘Like horse trading’: Credit Suisse retail investors challenge UBS takeover

UBS faces another legal challenge to its emergency takeover of Credit Suisse, as a group representing nearly 1,000 individual shareholders, including former employees of the failed Swiss bank, prepares to file a court claim in Zurich on Monday.

The Swiss Association for the Protection of Investors (Schweizerischer Anlegerschutzverein, or SASV), which represents retail investors, intends to lodge the claim on behalf of Credit Suisse shareholders – including some from the UK – who suffered heavy losses as a result of the rushed takeover in March.

UBS, Switzerland’s biggest bank, agreed to take over Credit Suisse, in a rescue orchestrated by the Swiss authorities, for almost $3.25bn (£2.65bn) – well below its market value at the time – amid fears that a failure to protect depositors could trigger a new global banking crisis.

The SASV claim is the second class action lawsuit brought by Credit Suisse shareholders against UBS. Shareholders were not allowed to vote on the emergency merger. There are also lawsuits against Switzerland’s financial regulator over the deal, from bondholders who were wiped out.

Credit Suisse shareholders received only one UBS share for every 22.48 shares they owned in the failed bank. This valued each Credit Suisse share at 0.76 Swiss francs (68p), while the book value on 31 March was 13.70 Swiss francs per share, SASV said. It argued that the exchange ratio was set “without any well-founded basis” as a result of “hasty action” and “turned out to be far too advantageous for UBS”.

The association said: “The takeover of the second largest Swiss bank by the largest bank had the character of horse trading, in which the purchase price was arbitrarily determined.”

The vast majority of the claimants in the lawsuit are Swiss, but they also include investors from the UK, US, Germany, Austria, Thailand and Dubai. Many are former Credit Suisse staff who were given shares as part of their annual pay packages.

Arik Röschke, the SASV’s general secretary, said: “Credit Suisse has a strong presence in London, and many employees received shares as part of their remuneration that are almost worthless now. The frustration among staff is therefore enormous, as I have been told.

“However, many employees are reluctant to take legal action against their employer. Especially because UBS is currently exploring which employees will be taken on and which will be dismissed.”

The merger has put thousands of jobs at risk in London’s financial district, where more than 5,000 Credit Suisse staff and 6,000 UBS employees are based. It has been reported that UBS is planning to axe more than half of Credit Suisse’s global workforce of 45,000.

Röschke said SASV would write to staff to tell them that they could join the class action lawsuit on an anonymous basis until any settlement talks begin, and they could later decide whether to reveal their identity to UBS.

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The claim will be brought under the Swiss merger act, and filed at the cantonal court of commerce in Zurich, where UBS is based, on Monday. It could take up to 18 months for a judge to rule in the case, according to Röschke, and it would be quicker for UBS to settle the case out of court.

SASV is bringing the case on a not-for-profit basis, with the Zurich-based law firm Niedermann Rechtsanwälte representing shareholders. Claimants are asked to pay 250 francs to cover SASV’s costs, but this could be partly refunded if costs are lower than expected. UBS declined to comment.

The other shareholder class action lawsuit is being brought by LegalPass, a Lausanne-based legal start-up, and backed by Ethos Foundation, which represents institutional investors who own about 5% of shares in both banks. It also challenges the exchange ratio set as part of the Credit Suisse takeover.

Several groups of Credit Suisse bondholders are suing Switzerland’s financial regulator over its decision to wipe out risky bank debt. They are being represented by the law firms Quinn Emanuel Urquhart & Sullivan and Pallas Partners. Pallas represents a group of more than 90 global asset managers, as well as a second group of 460 retail and family office clients.


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