UBS set to buy PaineWebber

UBS, the Swiss banking group, is close to announcing an agreement to buy PaineWebber, the US brokerage, for about $12bn in a deal that would give the Swiss bank access to investors in the heartland of America.

The deal would value PaineWebber at about $73 a share. PaineWebber’s shares closed on Tuesday at $49 15/16, meaning the UBS offer would represent a hefty 46 percent premium.

It was believed the deal would be structured as a mixture of cash and shares. To make foreign acquisitions easier, UBS this year listed so-called global registered shares in New York, Zurich and Tokyo, which could be freely traded across borders. The deal would fall short of fully satisfying UBS desire to build out its US investment bank.

Many UBS executives favoured acquiring an investment banking boutique, preferably one specialising in technology, although valuations for such operations are high.

However, UBS, a traditional power in European private banking, has made no secret of its desire to reach more wealthy investors in the United States.

This year, Marcel Ospel, UBS chief executive, said the bank was looking to buy or link with a retail-focused US company specialising in stockbroking, insurance or trust services.

PaineWebber would be an obvious choice, as it has been for some time. Indeed, many on Wall Street believe that PaineWebber should have merged with a larger firm years ago. Donald Marron, chairman and chief executive of PaineWebber, has long resisted the overtures of suitors looking for an expanded retail presence.

However, Marron has now reached the traditional retirement age of 65 and has spent two decades atop PaineWebber, suggesting the time for a sale may be coming nearer.

PaineWebber serves 2.7m institutional and individual clients, with assets of $452bn. In the first quarter, it added $13.8bn in client assets, or $219.5m a days. Reuters