(July 12 – 9:45 ET) – UBS AG is buying U.S. retail brokerage PaineWebber Group Inc. in a deal that values the broker at US$10.8 billion.

UBS is offering US$73.50 for each PaineWebber share, half in cash and half in stock. The deal is supported by both General Electric and Yasuda Mutual Life, its two largest shareholders with combined 30% ownership. The offer represents a 47% premium, and will be partly funded by a US$1.5 billion preferred share issue. The deal is expected to close by November and should be accretive to earnings by 2001.

PaineWebber will be rolled into UBS’ brokerage subsidiary UBS Warburg, maintaining its brand and absorbing the existing UBS U.S. private client business. The aim of the deal is to create the top retail firm in the world by combining the fourth-largest U.S. brokerage (about 8,800 brokers) with the world’s largest private bank. PaineWebber also offers broad U.S. distribution of UBS product.

Following completion of the merger, approximately half of the new firm’s private client assets will be from U.S. clients, 15% from Swiss clients and 35% from clients elsewhere in the world. Marcel Ospel, CEO of UBS, said, “The combination of UBS’s international reach and product range with PaineWebber’s leading position in the U.S. market for affluent and high net worth individuals will create a premier global investment services firm.”

As part of the deal a US$875 million incentive plan comprising stock and cash will be set aside for key PaineWebber professionals, including financial advisors, to be paid out over the next three years. Joseph Grano, currently president of PaineWebber, will manage the combined private client and asset management businesses. Donald Marron will continue as chairman of PaineWebber, and will become chairman of UBS North America.

UBS was advised by UBS Warburg and Wasserstein Perella. PaineWebber looked to Blackstone Group and Goldman Sachs & Co. for its advice.
-IE Staff