Feb 9, 2023
Credit Suisse to Buy Michael Klein’s Boutique for $175 Million
(Bloomberg) -- Credit Suisse Group AG said that it will buy Michael Klein’s investment banking boutique as it brings in the veteran dealmaker to lead the spinoff of its First Boston unit.
The Swiss bank said the purchase price is $175 million, with the full consideration valued at $210 million, to take over The Klein Group. The sellers will get cash, as well as a convertible note and warrants that will become equity in CS First Boston, which is being prepared for a spinoff or public offering by the end of 2024.
Klein, a former Citigroup Inc. executive who’s advised on many of the biggest global transactions, is expected to help recruit star dealmakers and attract investors as the Swiss firm works to carve out its investment bank. After a string of losses, it’s seeking to focus on areas of traditional strength such as capital markets, advisory and the leveraged finance businesses.
Klein, who was on Credit Suisse’s board of directors until late last year, has also been appointed chief executive officer of Banking and CEO of the Americas, in addition to being CEO designate of First Boston.
“This is a very fair price,” Credit Suisse CEO Ulrich Koerner said in an interview with Bloomberg Television on Thursday. “This is 100% the right deal at the right price, and there is no conflict of interest.”
Bloomberg reported last month that Credit Suisse and Klein had tense negotiations over the transaction and were at one point hundreds of millions of dollars apart on its value. The company engaged Deutsche Bank AG to provide a fairness opinion. Credit Suisse said Thursday that it paid a single-digit price to earnings multiple for the business and it’s expected to be earnings accretive and have little impact on capital ratios.
The Swiss bank already faced questions when Klein, a member of the board committee that decided to carve out CS First Boston, was appointed to run it. The firm’s chairman has said Klein abstained from some votes on the topic.
The new investment bank is set to be a partnership model, with key employees having a level of ownership. Credit Suisse plans to maintain a majority stake initially, but reduce its holding at a later stage. It has already secured a commitment from an unnamed investor for a $500 million injection into the business, and is holding discussions with other parties for equity stakes, capital injections or balance sheet partnerships. Bank executives have already said several parties are interested in investing in First Boston.
Credit Suisse said it cut the headcount of the CS First Boston business by 20% in the fourth quarter.
--With assistance from Francine Lacqua.
(Adds financial details on transaction from second paragraph.)
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