It's official: UBS to acquire Credit Suisse in historic rescue deal

• UBS will take over Credit Suisse, the Swiss National Bank said Sunday.
• UBS had been in talks this weekend about buying some or all of its troubled Swiss rival.

UBS will take over Credit Suisse, the Swiss National Bank announced Sunday afternoon.

The Swiss National Bank said in a statement Sunday afternoon that the takeover was made possible by support from the Swiss federal government and FINMA, which regulates Switzerland's finances.

"With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation," the statement said.

The Swiss government issued an emergency ruling that the deal can avoid a shareholder vote to speed up the process.

Credit Suisse and UBS later said the deal would value Credit Suisse at Sfr3 billion, or around $3.25 billion.

"This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue," UBS chairman Colm Kelleher said in a statement. "We have structured a transaction which will preserve the value left in the business while limiting our downside exposure."

In a press conference to announce the deal, the Swiss president said that deposit outflows on Friday made it clear that a stabilization of Credit Suisse was required. As part of the deal, the Swiss government is giving UBS a guarantee of Sfr9 billion to assume potential losses arising from certain assets.

"Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome," Axel P. Lehmann, chairman of Credit Suisse, said in a statement. "This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome."

The all-share deal will almost entirely wipe out Credit Suisse investors, with the $2 billion price tag significantly less than Credit Suisse's market capitalization on Friday, and a fraction of what Credit Suisse had been valued at at the turn of the year.

In addition, investors in some of Credit Suisse's bonds will also get wiped out, with $17 billion of so-called additional tier one bonds, or AT1s, getting a "complete write down", per the Swiss regulator.

Credit Suisse's two biggest shareholders are the Saudi National Bank and the Qatar Investment Authority, which have a combined stake of 17%.

The rescue deal comes a week after Silicon Valley Bank collapsed, which had a ripple effect through the banking sector and rattled investors who feared other banks could follow suit.

Shares in Credit Suisse dropped 24% on Wednesday after Saudi National Bank, which is its largest shareholder, warned it wouldn't be able to invest more cash in the bank because of regulatory hurdles.

On Thursday, it secured a $50 billion lifeline from the Swiss National Bank and its shares jumped by a fifth, only to drop a further 8% on Friday.