Credit Suisse retail investors plan lawsuit challenging UBS takeover

Credit Suisse was rescued by its rival UBS in March, but the SFr3 billion (US$3.4b) UBS paid for Credit Suisse was less than half the bank’s market value. Photo / 123RF

UBS is facing a further legal challenge to its controversial takeover of Credit Suisse, as hundreds of individual shareholders — including scores of former employees of the failed bank — are due to lodge a claim in Zurich’s commercial court on Monday.

The Swiss Investor Protection Association (SASV), which represents retail investors, is planning to file the claim on behalf of around 500 Credit Suisse equity investors who suffered steep losses when the bank was rescued by its rival UBS in March.

The takeover, which was orchestrated by Swiss authorities, denied shareholders in both banks a vote on the deal. The SFr3 billion (US$3.4b) UBS paid for Credit Suisse was less than half the bank’s market value on the final trading day before the deal was sealed and a fraction of its book value.

It is the second class action by shareholders in Credit Suisse targeting UBS, while there are several lawsuits being pursued by bondholders who were wiped out.

Last week, UBS announced it no longer needed government support for the takeover, in a move that may help ease public anger over the deal in the run-up to national elections in October.

The SASV is planning to submit its case — which is being brought under Switzerland’s Merger Act — on Monday, meeting a two-month deadline from when the deal was signed-off in June.

It is expected the judge would rule on the case within a year.

Arik Roschke, the general secretary of the SASV, suggested UBS had an incentive to settle this case. He noted if the judge found in the claimants’ favour, UBS could be required to pay all shareholders, possibly costing billions of dollars, though if the bank settled out of court, only the claimants would be reimbursed.

“UBS took over one of the best capitalised banks in Europe at a bargain price in a horse-trading deal,” he added.

While most of the claimants are Swiss, there are other investors from the UK, US, Germany, Austria, Thailand and Dubai. Many are former Credit Suisse staff who acquired shares as part of their remuneration.

“Some of our claimants worked at Credit Suisse for 30 years and part of their payment was in stock,” Roschke added.

He said some former Credit Suisse staff had shares that 15 years ago were worth more than SFr80, but they received just SFr0.76 for them as part of the UBS takeover.

“These people stayed with the company and now they have lost everything. It’s sad for these shareholders that their loyalty has been punished.”

The SASV case is being run on a not-for-profit basis, with claimants asked to pay a SFr250 fee to cover the association’s costs, which could be partly refunded. The Swiss law firm Niedermann Rechtsanwalte has been retained to work on the case.

UBS declined to comment on the case.

The claim follows a similar suit brought by Lausanne-based legal services start-up LegalPass, which has been backed by Ethos Foundation, a body that represents institutional investors owning about 5 per cent of stock in both banks.

At least two law firms — Quinn Emanuel Urquhart and Sullivan and Pallas — are representing bond-holders who were controversially wiped out when US$17b of additional tier-one securities were written down as part of the transaction. Credit Suisse staff have also enquired about launching legal action after their bonuses linked to the AT1s were also cancelled.

Lawyers in the US, meanwhile, are working on cases that target individual former managers at Credit Suisse for their part in the bank’s downfall.

Written by: Owen Walker

© Financial Times