THE MERGER OF UNION BANK OF SWITZERLAND AND SWISS BANK CORPORATION (A): THE PROP
ID: 2404369 • Letter: T
Question
THE MERGER OF UNION BANK OF SWITZERLAND AND SWISS BANK CORPORATION (A): THE PROPOSED MERGER Summary Term Sheet for the Merger Announcement date December 8, 1997 Consideration Form of payment Exchange ratio Stock ex-UBS Registered shares 1 UBS AG share for each registered share 5 UBS AG shares for each bearer share 1.0769 UBS AG shares for each SBC share 214.37 million shares Bearer shares SBC Number of UBS AG shares to be issued Effective ownership in UBS AG of ex-UBS shareholders SBC shareholders 60% 40% Price Combined market capitalization - Dec. 4, 1997 (CHF m)85,094 No. of UBS AG shares issued (m) Market value per UBS AG share (CHF) 214.37 396.95 Ratio to SBC shareholders Value to SBC shareholders (exchange ratio times UBS AG market value per share) (CHF) SBC share price on December 4, 1997 (merger was announced December 8, 1997) (CHF) Implied premium / discount 1 & 1/13 427.5 431 -0.82% Ratio to ex-UBS bearer shareholders Value to ex-UBS bearer shareholders (exchange ratio times 1,984.7 UBS AG market value per share) (CHF) ex-UBS bearer share price on December 4, 1997 (merge1,891.0 was announced December 8, 1997) (CHF) Implied premium discount 4.96% Ratio to UBS registered shareholders Value to UBS registered shareholders (exchange ratio times UBS AG market value per share) (CHF) 396.95Explanation / Answer
1. Calculate NPV for Swiss Bank
1995
Assets = 286276
Liabilities and capital = 274169
other cash= 14107
capital = assets - liabilities
274169 = 286276 -12107
capital = 12107 + 14107 =26214
For year 1996
Assets = 359946
Liabilities and equity =346124
capital = 13822 +13822 = 27764
NPV= 26214/(1+ 0.12 ) 1 + 27764(1 + 0.12 )2
= 26214(1.12) + 27764(1.12*1.12)
= 29359.68 + 27764(1.25) = 29359.68 + 34705 = 64064.68
NPV for Union bank
capital +profit (1995)
22096+1854 =23950
(1996)
23137 +197 = 23334
NPV= 23950/(1+0.12)1 + 23334(1+0.12)2
=23950(1.12) + 23334(1.12*1.12)
= 26824 +23334(1.25) = 26824 +29167.5
=55991.5
NPV in case of merger
net profit after tax = 3182
Assets= 922284
risk weighted assets =415600
assets without risk = 922284 - 415600 =506684
share holders equity = 38412
3182 + 415600 + 38412 = 455394 - capital and laibilities
NPV = 455394 - 400000(under consideration) = 55394
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