As part of its plan to spin off its investment banking unit, Credit Suisse today formally announced the acquisition of M. Klein & Co. The deal comes with a hefty price tag.
Credit Suisse is acquiring the investment banking business of M. Klein & Company (MK&C), part of the Klein Group, for $175 million, according to a statement Thursday from Credit Suisse.
With the spin-off of CS First Boston, Michael Klein becomes the new CEO of CS First Boston and also takes a seat on the executive board of the Credit Suisse executive board. The profitable business will be folded into CS First Boston's management and advisory capabilities.
Michael Klein (Image: Credit Suisse)
The transaction is not without its critics who point out potential conflicts of interest, as finews.com reported.
That doesn't seem to bother Credit Suisse CEO Ulrich Koerner who said «I am looking forward to welcoming Michael Klein to the executive board. He is an exceptional banker and dealmaker with proven and recognized entrepreneurial success, and I am confident that CS First Boston will thrive under his leadership.»
Klein will also become CEO of the banking business and CEO of the Americas and will report directly to Koerner.
In October 2022, Klein stepped down from the Credit Suisse board of directors, which he joined in 2018. Previously, he was CEO of Citigroup's institutional business, responsible for the bank's corporate, institutional, and government businesses.
Klein’s appointment to the executive board and Credit Suisse’s acquisition of MK&C are subject to regulatory approvals. The transaction expected to close in the first half of 2023.
Standalone Capital Markets Business
The spinoff creates a business with global capabilities that will seek a long-term partnership with Credit Suisse Group. The Swiss bank wants to use such a partnership model to position itself globally and focus more strongly than its competitors in investment banking.
To align its interests with those of Credit Suisse, Klein Group will receive a convertible bond and a warrant, according to the statement. The convertible bond provides for annual payments and will be converted into shares of CS First Boston. The warrant will entitle the seller to subscribe for shares of CS First Boston in a qualified initial public offering.
The transaction is expected to weaken Credit Suisse Group's CET1 ratio by less than 10 basis points.
Under Credit Suisse Control
Upon completion of the acquisition, MK&C will be fully integrated into CS First Boston. Credit Suisse will retain control over the ultimate scope and structure of CS First Boston, including options to attract capital from third parties in the future, it said.
The investment banking boutique is a registered broker-dealer based in New York. It has about 40 employees and has assisted with more than $1.5 trillion worth of transactions since its founding in 2010.
