UBS shares up on HSBC`s $80-billion takeover buzz

There was no official word from either side, but various media reports, websites and blogs quoted unnamed traders as saying that the reason behind the dramatic movement of the shares was rumours of a possible $80-billion bid by the British banking major.

UBS currently has a market value of more than $42 billion and the rumoured bid marks a huge premium over the prevailing share price of the company.

 

UBS shares rose by 4.2 per cent to 23 Swiss francs on the Swiss Stock Exchange in Zurich. It was trading nearly four per cent up in the pre-market trade in the US.

Today's surge followed a fall of nearly 6 per cent in the UBS stock yesterday on the New York Stock Exchange.

In contrast, HSBC shares dropped nearly one per cent on the London Stock Exchange to 7.96 pounds.

When contacted, a UBS spokesperson said: "We do not comment on market rumours." HSBC officials, meanwhile, did not immediately respond to a query in this regard.

Rumours about a possible tie-up has been long-standing in the European markets amid analysts foreseeing a need for consolidation in the financial services sector.

Rumours first surfaced nearly a year ago about such a deal followed by another round in March this year.

"Mid-afternoon murmurs (yesterday) suggested that HSBC, the London-based global banking giant, was mulling a bid for UBS, its Swiss counterpart which has sufferred in the prevailing market turmoil," The Independent, a British daily, wrote in a market report on March 8.

The Independent report quoted an unnamed trader as saying, "While the talks were fresh and somewhat unexpected, considering the size of HSBC and the problems at UBS, they were not entirely without merit." The trader, however, cautioned about the "spurious" nature of most M&A speculations on that day.

The same report quoted another trader Nick Brown from Evolution Securities as saying, "It is an interesting point. HSBC should unquestionably be one of the best in investment banking businesses and they may be looking to UBS to do just that."

UBS has been at the centre of the sub-prime crisis as the biggest casualty in Europe, while HSBC has emerged mostly unscathed.

UBS has written off over $35 billion in investments, while it reported a loss of over $11 billion in the first quarter of this year. It recorded a net loss of 5.2 billion Swiss francs (about five billion dollar) in 2007.