UBS (NYSE:UBS) may be voicing some regrets over its shotgun wedding with Credit Suisse (NYSE:CS). Here are some excerpts from a new regulatory filing.
“The emergency circumstances under which UBS (UBS) conducted its due diligence of Credit Suisse (CS) may have affected UBS’s ability to fully evaluate Credit Suisse’s (CS) assets and liabilities prior to the execution of the merger agreement.”
“If the circumstances of the due diligence affected UBS’s (UBS) ability to thoroughly consider Credit Suisse’s (CS) liabilities and weaknesses, it is possible that UBS (UBS) will have agreed to a rescue that is considerably more difficult and risky than it had contemplated. This could affect the future performance of UBS (UBS), its share price, and its value as an enterprise.”
“As the merger consideration was fixed at that time, risks developing subsequent, or risks that were not fully identified under the circumstances result in the value of Credit Suisse (CS) at the time of completion of the transaction being considerably higher or lower than at the time the merger consideration was agreed. The announcement and pendency of the transaction could adversely affect each of UBS (UBS) and Credit Suisse’s (CS) respective businesses, results of operations, financial condition and/or prospects.”
“UBS (UBS) may not realize all of the expected cost reductions of the transaction… Combining our two companies may be more challenging, costly or time-consuming than we expect. “
“The write-down of Credit Suisse’s (CS) additional tier 1 (AT1) bonds after it was granted emergency liquidity assistance under the Special Ordinance may result in significant litigation against Credit Suisse (CS) that UBS (UBS) will inherit upon the completion of the transaction and may lead to a significant attenuation in the market for AT1 instruments more generally.”
“UBS (UBS) and Credit Suisse (CS) may have difficulty attracting, motivating and retaining executives and other employees in light of the transaction.”
“The transaction may not be accretive, and may be dilutive, to UBS’s (UBS) earnings per share, which may negatively affect the market price of UBS (UBS) and the implied value of the UBS Group (UBS) shares following the transaction.”
While the disclaimers may be worrisome, UBS (UBS) shares hardly moved on the developments, seemingly due to some fine print at the bottom of filing. Helping it absorb billions of dollars in losses, the Swiss bank currently expects to record a one-off gain – due to so-called “negative goodwill” of $34.8B – by buying Credit Suisse (CS) for a fraction of its longtime rival’s book value.