UBS Group has entered final negotiations with a Beijing-backed fund over the sale of Credit Suisse’s money-losing China venture after talks with Citadel Securities stalled, according to people familiar with the matter.
UBS is now in exclusive talks with its Chinese partner, Beijing State-Owned Assets Management, on the deal, the people said, asking not to be identified because the discussions are private.
A final decision and an agreement with the buyer could be reached as soon as the end of this month, they said.
As part of the proposed two-step transaction, the Swiss lender plans to first sell most of its stake in Credit Suisse Securities (China) to the Beijing government, which will ultimately own 85 per cent of the venture. It will then buy Beijing’s 33 per cent holding in UBS Securities to attain full ownership, the people said.
The move brings the months-long rivalry for Credit Suisse’s investment bank in the world’s second-largest economy closer to an end at a time when dealmaking has plummeted.
It would also be seen as a blow to the ambitions of Ken Griffin’s Citadel Securities, which is going against the grain to build a local platform to bring its market-making capabilities to mainland China.
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UBS would still retain 15 per cent of the Credit Suisse venture after the transaction, with the Beijing city government holding the rest, said the people.
Keeping UBS as a foreign shareholder may help appease regulators because the license was originally awarded to the international bank as part of a move by authorities to increase global competition.
A Hong Kong-based spokesperson at UBS declined to comment. Representatives for the Beijing government fund, Citadel Securities and Founder Securities, which currently holds 49 per cent in Credit Suisse’s joint venture, also declined to comment.
Citadel Securities is seeking to expand its presence in China with a broader footprint spanning brokerage execution, financial advisory, market-making and asset management under a securities platform, a person familiar said in April.
Should its latest bid fail, the firm will continue to look for other acquisition opportunities or apply for its own licenses, one of the people said.
UBS put the Credit Suisse venture up for sale after taking control of its smaller Swiss rival when it collapsed last year.
Chinese rules stipulate that a foreign shareholder can’t hold majority stakes in two domestic brokerages simultaneously. UBS has controlled 67 per cent of UBS Securities since 2022.
While Citadel Securities is the only global firm pursuing the deal, the franchise has also attracted a higher bid from Chinese billionaire Jack Ma-backed Ant Group, people familiar had said earlier. UBS has sought around 2 billion yuan (S$373 million) for the entire China unit, including the stake held by Founder Securities.
Beijing has made an offer slightly lower than the 2 billion yuan target, one of the people said. Before it collapsed in March last year, Credit Suisse offered to buy out the remaining stake from its Chinese partner, valuing the entire firm at about 2.3 billion yuan.
The Beijing firm, known as BSAM, also holds stakes in Bank of Beijing and holds stakes in Beijing Rural Commercial Bank and CCB Consumer Finance among others.
Credit Suisse Securities, with 1.2 billion yuan of assets, posted a loss of of 198.9 million last year, narrowing from 254.5 million in 2022, according to a public filing. UBS Securities saw its profit tumble 92 per cent from a year earlier to 18.9 million yuan in 2023. BLOOMBERG
