UBS To Buy PaineWebber For $10B

Wednesday, July 12th 2000, 12:00 am
By: News On 6

ZURICH, Switzerland (AP) — Swiss banking group UBS is buying PaineWebber, the fourth-biggest brokerage firm in the United States, for $10.8 billion in cash and stock in the latest international marriage of financial services heavyweights.

The deal announced Wednesday gives UBS a larger foothold in the United States with a firm known for its large base of affluent clients. It also extends the recent global consolidation that is reshaping the banking, insurance and securities industries.

PaineWebber, popularly known for its long-running advertising slogan ``Thank You, PaineWebber,'' will become part of the UBS Warburg securities division but will continue to operate in the United States under its own name after the deal is completed.

Donald B. Marron, chairman and chief executive of PaineWebber, had long resisted selling the company, but said in a statement on Wednesday: ``This is the right merger, with the right partner, at the right time.''

The companies hope to complete the deal in November pending shareholder and regulatory approval.

PaineWebber's two largest shareholders, General Electric Co. and Yasuda Mutual Life, have agreed to vote for the deal. Together, they control about 30 percent of PaineWebber's shares.

UBS, formed from the 1998 merger of Union Bank of Switzerland and Swiss Bank Corp., manages more than $1 trillion in client assets and employs 49,000 people around the world.

PaineWebber has 8,554 brokers in 385 offices and manages client assets of $452 billion. Its brokerage force is fourth in the U.S. behind Merrill Lynch, Morgan Stanley Dean Witter & Co. and Citigroup's Salomon Smith Barney unit.

PaineWebber reached an agreement in April to merge with Nashville, Tenn., brokerage firm J.C. Bradford & Co. for $620 million in cash.

Under the terms of Wednesday's deal, UBS would offer $73.50 a share, which would give PaineWebber shareholders a 47 percent premium over their value at close of trading Tuesday.

Shares of PaineWebber shot up in early trading on New York Stock Exchange Wednesday, rising $17.563 to $67.50.

UBS shares fell by 5.2 percent to 230 Swiss francs ($141) in Switzerland, but analysts said this had more to do with a separate announcement of weak asset growth than with the acquisition.

PaineWebber shareholders would be offered half in cash and half in UBS shares at the rate of 0.4954 UBS shares for each PaineWebber share.

UBS listed its shares on the New York Stock Exchange in May and said at the time it was looking for opportunities to expand in the United States. ``We have our aspirations to grow further,'' UBS chief executive Marcel Ospel said.

Ospel added that UBS' international reach and product range will mix well with PaineWebber's leading position in the United States for affluent customers.

Analysts generally agreed.

``In the longer run this is certainly a good strategic fit and the price is reasonable,'' said Susanne Borer at Bank Vontobel, a Zurich-based private bank.

``This planned acquisition strongly bolsters UBS' operations in the U.S. high net-worth retail market and enhances further the Swiss group's worldwide positioning in private banking and asset management,'' said Moody's Investors Service in London.

After the deal closes, Marron will stay on as chairman of the PaineWebber Inc. unit, and become chairman of UBS North America, advising Ospel.

The latest deal continues a pattern of cross-Atlantic mergers between financial firms as they seek competitive advantage. Among those deals have been the Deutsche Bank AG's purchase of Bankers Trust Corp., and Dutch insurer Aegon NV's acquisition of Transamerica Corp. in 1999.


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