Judy, partner since 2018 (Toronto, Ontario)
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‘Deal of the century’: how UBS’s rescue of Credit Suisse proved a boon
UBS’s top managers were sceptical when they were forced to rescue their scandal-ridden rival Credit Suisse. Five months on, the deal has made the bank Europe’s second most valuable lender.
On Thursday UBS said the state-sponsored takeover had fuelled a $29bn gain, a record quarterly profit for any bank. Chief executive Sergio Ermotti also confirmed that UBS would get to keep its rival’s “crown jewel” — the domestic consumer bank — while also cherry picking the most attractive assets, clients and staff from the investment bank and wealth management divisions.
The stock rose to its highest level since the 2008 financial crisis, extending a 31 per cent surge this year. This means that UBS’s market value has vaulted over that of BNP Paribas — ranking the bank second in Europe after HSBC — and has trumped that of US lender Citigroup.
“The Credit Suisse acquisition will act as an accelerant to our plans,” Ermotti told analysts.
Since the merger was sealed over a frantic weekend in March, UBS chair Colm Kelleher and Ermotti have overcome political concerns over its dominant market position — the combined bank’s $1.7tn assets eclipse Swiss GDP — notably by exiting taxpayer-funded government support facilities early.
Now the pair faces the tricky task of integrating the businesses and matching expectations for what looks like one of the biggest steals in financial history.
While removing state guarantees has damped political objections, UBS’ record gain prompted angry reactions in Switzerland, which is holding general elections in October.“
UBS’s figures are nothing but shocking,” said Cédric Wermuth, co-president of Switzerland’s second-largest political bloc, the Social Democratic Party. The takeover was the “deal of the century” he said, and had come at the expense of the Swiss people.
The $29bn accounting gain on the Credit Suisse takeover — known as negative goodwill, or badwill — largely reflects the fact that the price paid for Credit Suisse — $3.4bn — amounted to only 6 per cent of its tangible book value.
UBS also announced that the integration of Credit Suisse’s domestic retail unit would result in 3,000 redundancies in Switzerland in the coming years. Deeper job cuts from the group’s more than 100,000 combined workforce are expected to follow, but executives are being tight-lipped about their plans to avoid more controversy.
“It must not be that in the end, it is the counter clerks who pay for the irresponsible behaviour of their bosses,” Wermuth said. Absorbing Credit Suisse is now expected to take up to three years — shorter than the four years initially signalled by UBS. Some analysts feared that when the deal was agreed it would derail UBS’s longer-term ambitions of growing its business in Asia-Pacific and the US, where it trails Morgan Stanley, the world’s largest wealth manager, in market share.
This week’s fun finds
EdgePoint Football Club’s fun in the sun
Despite being slightly understaffed, the team notched a 2-0 win to level their season record to 1-1.
Sriracha: The good kind of heat
Huy Fong Foods’ sriracha sauce—bottled in the instantly recognizable plastic bottle with a green squeeze cap and a large rooster logo—has inspired numerous tattoos, songs, merch, and even a custom Lexus car.
Everyone from TV show host Alton Brown to venture capitalist Chris Sacca stocked up bottles of the iconic hot sauce amid the “#srirachapocalypse” in 2013, when Huy Fong’s factory was ordered to shut down for emanating odors so spicy they were a “public nuisance.”
In 2022 and 2023, there has been an even bigger #srirachapocalypse, during which Huy Fong has claimed that the red jalapeño peppers used to make their version of sriracha have become unavailable due to supplier issues. Many small businesses have had to switch to less familiar, and beloved, hot sauces, and some devotees have resorted to paying far above normal supermarket prices for bottles on resale sites like eBay.
The company has reportedly spent no money on advertising—it’s earned its fabled status completely by word-of-mouth. “Run free, my child, and spread the sweet, spicy gospel of truth,” the company’s website reads.
The original sriracha sauce—a mix of chili peppers, distilled vinegar, garlic, salt, and sugar—was created by Gimsua Timkrajang and Thanom Chakkapak more than 80 years ago in the port town of Si Racha, Thailand. Though it began as a homemade recipe, friends and family soon encouraged them to sell it commercially. The family eventually began distributing it under the brand Sriraja Panich, which was bought by Thai food manufacturing giant Thaitheparos in 1984.
But the man responsible for inspiring much of the American mania for sriracha is Chinese-Vietnamese immigrant David Tran. In 1979, amid the Sino-Vietnamese War, Tran fled Vietnam on the Huey Fong and settled in Los Angeles the following year. He began his operation by grinding peppers by hand and selling the hot sauce from his blue Chevy van.
