Zurich (awp) – Credit Suisse announced on Thursday, on the sidelines of its annual results, the acquisition of the American The Klein Group (MK&C), the investment banking activity of Michael Klein. The latter will take control of CS First Boston, the future investment bank in the process of becoming independent from the Zurich banking group.
The acquisition price was set at $175 million, partially in the form of a bond convertible into CS First Boston shares, the two-veiled bank said in a statement. Mr. Klein will also take charge of the Banking business and the Americas region. He thus joins the general management of Credit Suisse.
New York-headquartered MK&C, which employs around 40 people, has advised on $1.5 trillion deals since its founding in 2010. The business has been described as ‘consistently profitable’ . In the wake of this acquisition, the employees of the American firm will join CS First Boston.
Credit Suisse boss Ulrich Körner spoke of “an exceptional opportunity” for the Zurich banking group and a “strategic decision to create value for shareholders”. Mr. Klein “is an exceptional banker and a proven negotiator”, added Ulrich Körner. According to the latter, the arrival of the American businessman will boost the activities of CS First Boston.
Limited impact on equity
The managing director of Credit Suisse insisted that the creation of CS First Boston as an independent entity was “an important step in the transformation” of the bank. The takeover operation, finalized in the first half, should have an impact of less than 10 basis points on the core capital ratio (CET1).
Credit Suisse will retain control of the new entity and reserves the right to bring other capital into it. The autonomy of this new entity should however take two years or more, detailed Mr. Körner during a telephone press conference. Several investors are interested in participating in the future structure.
At the end of October, the group had indicated that it had received interest from an unidentified investor who would be ready to inject 500 million dollars into the new entity. This interest is still relevant, insisted the boss.
With the restructuring and outsourcing of its investment bank, Credit Suisse intends to reduce the associated risks. From 45-50 billion previously, risk-weighted assets (RWA) should eventually rise to around 20 billion under the new entity, according to presentation documents. Exposure to leverage effects must fall from 100 billion to less than 50 billion.
Ultimately, Credit Suisse expects to generate more than $ 2.5 billion in revenue with CS First Boston, including an IPO or outsourcing are planned by the end of 2024 at the earliest.
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