UBS faces new class action

Even as the bank removes Credit Suisse nameplates, more legal storm clouds roll in.

Zurich’s commercial court is set to witness another lawsuit against UBS’s contentious acquisition of Credit Suisse. This fresh challenge is spearheaded by the Swiss Investor Protection Association, representing approximately 500 Credit Suisse equity investors, and is expected to be lodged Monday.

These investors, including numerous ex-employees of the beleaguered bank, endured significant losses when UBS stepped in to salvage Credit Suisse earlier this year.

“The SASV’s action under Art. 105 of the Merger Act deals with the question of whether the share and membership rights of CS shareholders were adequately safeguarded in the context of the takeover of CS by UBS. CS shareholders received only one UBS share for every 22.48 CS shares,” the association said.

Swiss authorities had choreographed this takeover, barring shareholders from both banking giants to cast their vote on the transaction. The acquisition price of $3.4 billion by UBS was significantly lower than Credit Suisse’s market value the day prior to the deal’s finalization, much less than its actual book value.

This lawsuit isn’t the first against UBS regarding this acquisition; shareholders had previously lodged a class action, with bondholders also taking legal action.

In a significant development last week, UBS declared that government backing for this acquisition was no longer required, a move tat was probably designed to temper public dissatisfaction ahead of the forthcoming October national elections.

Arik Röschke, the general secretary of the SASV, commented on the looming case that is set to be filed under the Swiss Merger Act. He hinted at a possible out-of-court settlement, emphasizing the colossal compensation UBS might have to shell out if the court favors the shareholders. Referring to the acquisition, Röschke said, “UBS procured one of Europe’s most financially robust banks in a fire sale.”

The plaintiffs hail from across the globe including the UK, U.S., Germany, Austria, Thailand, Dubai and of course, Switzerland. Many are ex-employees of Credit Suisse, holding shares given as part of their compensation packages. Röschke emphasized their plight, pointing out that some who held shares valued at over SFr80 about a decade and a half ago received a meager SFr0.76 per share through the UBS takeover deal.

Niedermann Rechtsanwälte, a Swiss law firm, has been appointed to champion this lawsuit. Meanwhile, UBS has refrained from commenting on the situation.

This legal claim mirrors another filed by Lausanne’s LegalPass, with the backing of the Ethos Foundation, representing institutional investors of both banks. Separate law firms are also representing bondholders aggrieved by the controversial nullification of $17 billion of securities as part of the deal.

In the U.S., attorneys are scrutinizing potential cases against individual ex-managers of Credit Suisse, holding them accountable for the bank’s misfortunes.