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Thursday, July 13, 2000

Swiss firm buys PaineWebber
Merger will create global firm
By Dunstan Prial
Associated Press
NEW YORK - Swiss banking group UBS AG, seeking access to the wealthiest class of U.S. investors, is buying PaineWebber for $10.8 billion in cash and stock.
   The deal announced Wednesday is the latest international marriage of financial services heavyweights and represents the largest acquisition ever by a European suitor of a U.S. brokerage firm.
   By acquiring New York-based PaineWebber - the fourth-biggest brokerage firm in the United States with 8,500 brokers - UBS gets a stronger foothold in the United States with a company known for its large base of affluent clients.
   It also extends the recent global consolidation that is reshaping the banking, insurance and securities industries, helped in part by legislation approved last year in the United States that eliminated barriers designed to keep companies in those industries separate.
   PaineWebber, popularly known for its long-running advertising slogan "Thank You, PaineWeb-ber," 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 during a press conference in New York that PaineWebber's clients need the global resources UBS can provide. "This will be the decade of the global individual," Marron said. "The world is changing and we need to do more for clients to keep and accelerate our growth rate."
   Added UBS chief executive Marcel Ospel: "The beauty of this merger is that for the first time, we're creating a global financial services firm aimed at affluent and high net worth investors."
   The companies hope to complete the deal in November, pending shareholder and regulatory approval.
   Both companies said regulatory hurdles aren't expected either in the U.S. or in Europe.
   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.
   Indeed, GE chairman Jack Welch issued a statement Wednesday praising the merger. "We're pleased with the merger of PaineWebber and UBS, which adds to the strong global franchise UBS enjoys today, and dramatically increases its U.S. presence," Welch said.
   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. To emphasize its penetration among affluent investors, the firm said its average client account size of about $200,000 is 40 percent larger than its closest rival, Merrill Lynch & Co.
   PaineWebber has also been on the move recently, buying Nashville, Tenn., brokerage firm J.C. Bradford & Co. for $620 million earlier this year.
   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 shoot up
   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.
   On Wednesday, shares of PaineWebber shot up 33.9 percent on New York Stock Exchange, rising $16.937 to $66.875. United States shares of UBS fell $13.562 to 135.188, also on the NYSE.
   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.
   Ospel said Wednesday that UBS' international reach and product range will mix well with PaineWebber's leading position in the United States for affluent customers.
   'A good strategic fit'
   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 United States 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 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 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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