Swiss financial giant UBS has is selling its private banks and GAM unit (not to be confused with its global asset management business) to Julius Baer in a deal that values the properties at 5.6 billion Swiss francs, equivalent to $5.4 billion at current exchange rates.

The total price consists of CHF 3.8 billion in cash and cash equivalents, and UBS also gets a 21.5% stake in Julius Baer. The deal involves the three private banks, Banco di Lugano, Ehinger & Armand von Ernst and Ferrier Lullin as well as specialist asset manager GAM.

Pending necessary approvals and subject to successful financing, the deal is expected to be completed by the end of 2005. UBS expects to record a pre-tax gain of at least CHF 3.5 billion from the transaction, which will be booked at time of deal closing.

UBS will not take a seat on Julius Baer’s board of directors or exercise any control or influence on its strategy or on its operational business decisions, and UBS will not vote its shares. The private banks will adopt the Julius Baer brand name. GAM will continue to be marketed as an independent brand.

UBS says that the sale is consistent with its strategy regarding the private banks and GAM, and the expected consolidation of the Swiss private banking industry. UBS says it analyzed a number of options and came to the conclusion that the sale to Julius Baer would be in the best interests of all stakeholders.

“Julius Baer’s business model is very similar to the one of the three private banks and GAM. The sale of the complete unit pays special attention to the preservation of continuity between clients and their advisors – creating value for all parties,” said Peter Wuffli, UBS CEO.

“These private banks and GAM are an excellent fit to Julius Baer. We have the same understanding of private banking and asset management as we both strive to understand the wealth management needs of each individual client and offer them value-enhancing solutions,” Raymond J. Baer, chairman of Julius Baer, said.