UBS Can Use Repurchased Shares to Fund Credit Suisse Takeover

Instead of raising new capital to fund its takeover of Credit Suisse by issuing new shares, UBS will repurpose some of those it obtained as part of a repurchase program.

In March of last year, UBS launched a $6 billion stock buyback program, scheduled to run until the end of March of next year as part of a capital reduction, which has now been amended, according to a statement Tuesday.

To fund its government-imposed take over on March 19 of rival Credit Suisse for three billion Swiss francs, and avoid raising new capital, UBS sought changes to the terms of the buyback. Instead of canceling the repurchased shares, they will be used to complete the takeover.

A maximum of just over 178 million «UBS Merger Shares» will be required for the transaction, where one share will be exchanged for 22.48 shares of Credit Suisse. To date, UBS bought back 298.5 million shares through the program, corresponding to 8.5 percent of those registered,

In the interest of the shareholders of UBS, the board of directors of UBS has decided not to implement a capital increase. Instead, already issued own shares of UBS shall be used for the completion of the Merger, according to the statement.

As of April 14, UBS owned either directly or indirectly 473.2 million of its registered shares or 13.4 percent of voting rights. Black Rock is UBS’s largest shareholder at just under five percent. Artisan Partners, Dodge & Cox in the US, and Norway’s Norges Bank each own just over three percent.

UBS said it does not know its intentions concerning the sale of shares as part of the buyback program.

On April 2, UBS requested permission from the Swiss Takeover Board to approve the amended repurchase program and received it on April 12.