Retail investors oppose UBS’ takeover of Credit Suisse

UBS is facing yet another legal hurdle in connection with its emergency acquisition of Credit Suisse, as a group representing close to 1,000 individual shareholders, including former employees of the failed Swiss bank, is preparing to submit a court claim in Zurich. The Swiss Association for the Protection of Investors (SASV), which advocates for retail investors, plans to file the claim on behalf of Credit Suisse shareholders who incurred significant losses due to the hasty takeover orchestrated by UBS in March.

The SASV’s legal action marks the second class action lawsuit brought by Credit Suisse shareholders against UBS. These shareholders were not afforded the opportunity to vote on the emergency merger. Furthermore, legal actions are underway against Switzerland’s financial regulator regarding the deal, brought by bondholders who faced losses.

In the takeover, Credit Suisse shareholders received only one UBS share for approximately every 22.48 shares they owned in Credit Suisse. This resulted in valuing each Credit Suisse share at 0.76 Swiss francs, significantly below the book value of 13.70 Swiss francs per share as of March 31. The SASV argues that this exchange ratio lacked a solid foundation and was the result of rushed decisions, ultimately favouring UBS disproportionately.

The SASV alleges that the takeover, wherein the largest Swiss bank acquired the second largest, resembled “horse trading,” characterised by an arbitrarily set purchase price. The majority of claimants in the lawsuit are Swiss, but the group also includes investors from the UK, US, Germany, Austria, Thailand, and Dubai. Notably, a significant portion of these claimants consists of former Credit Suisse employees who received shares as part of their annual compensation.

Arik Röschke, the SASV’s general secretary, highlights the frustration among staff, particularly in London, where many were given nearly worthless shares. While many employees are hesitant to pursue legal action against their employer, the ongoing uncertainty regarding staff retention by UBS adds to the complexity.

The impending legal claim will be based on the Swiss merger act and will be filed at the cantonal court of commerce in Zurich. Röschke estimates that the legal process could take up to 18 months for a judge to rule; however, settlement discussions outside of court could expedite resolution.

The class action lawsuit is being pursued by SASV on a not-for-profit basis, with representation from Zurich-based law firm Niedermann Rechtsanwälte. Claimants are required to contribute 250 Swiss francs to cover costs, with the possibility of partial refunds if costs remain lower than anticipated.

Additionally, another shareholder class action lawsuit, supported by LegalPass and the Ethos Foundation, is challenging the exchange ratio established during the Credit Suisse takeover. Several groups of Credit Suisse bondholders are also taking legal action against Switzerland’s financial regulator, contesting the decision to eliminate risky bank debt. These bondholders are represented by law firms Quinn Emanuel Urquhart & Sullivan and Pallas Partners.