UBS to Buy PaineWebber for $10.8 Billion

Z U R I C H, July 12, 2000 -- Ina move that would give Switzerland’s biggest bank access tomillions of wealthy American investors, UBS AG said it will buyPaineWebber Group Inc. in a cash and stock deal valuing the at $10.8 billion.

The proposed deal extends the recent global consolidation that isreshaping the banking, insurance and securities industries.

The companies hope to complete the deal in November, pendingshareholder and regulatory approval.

Donald B. Marron, chairman and chief executive of PaineWebber,had long resisted selling the company, but said in a statement today: “This is the right merger, with the right partner, atthe right time.”

PaineWebber’s two largest shareholders, General Electric Co. andYasuda Mutual Life, have agreed to vote for the deal. Together,they control about 30 percent of PaineWebber’s shares. UBS, created from the merger of Union Bank of Switzerland andSwiss Bank Corp. in 1998, manages more than $1 trillion in clientassets and employs 49,000 people around the world.

Terms of the Deal

Under the transaction, PaineWebber shareholders can accepteither 0.4954 UBS shares per PaineWebber share or $73.50 incash, but UBS said it would ultimately pay half in cash, half inshares for the U.S. broker.

Some U.S. investors are seen likely to favor ashare-for-share exchange, which is not taxable as a cash offerwould be.

UBS chief executive Marcel Ospel said UBS’ international reach and product range will mix well with PaineWebber’s leading positionin the United States for affluent customers.

PaineWebber has 8,554 brokers in 385 offices and manages clientassets of $452 billion. Its brokerage force is fourth in the UnitedStates behind Merrill Lynch, Morgan Stanley Dean Witter & Co. andCitigroup’s Salomon Smith Barney unit. PaineWebber reached an agreement in April to merge withNashville, Tenn., brokerage firm J.C. Bradford & Co. for $620million in cash.

UBS recently listed its shares on the New York StockExchange. It said at the time the listing would aid in U.S.acquisitions by allowing it to use own shares as a currency.

It said it would fund part of the cash offer by issuing $1.5billion in UBS preference shares.

John Leonard, European bank analyst at Schroder SalomonSmith Barney, said that based on his firm’s calculations, themove made sense, and was in keeping “with the integrated globalsecurities firm approach.”

PaineWebber a Takeover Target

UBS, based in Basel and Zurich, is one of the world’slargest managers of private and institutional money, but itsstrengths in private wealth management are centered in Europe.

For brokers like PaineWebber, which face increasing pressurefrom competition from e-services, the move also makes sense,analysts said.

PaineWebber, which last quarter posted the best operatingresults in its 120-year history, has long been described as anattractive takeover target because of its large brokerage salesforce and upscale client base. “In the longer run this is certainly a good strategic fit andthe price is reasonable,” said Susanne Borer at Bank Vontobel, aZurich-based private bank. After the deal closes, Marron will stay on as chairman of thePaineWebber unit, and become chairman of UBS North America,advising Ospel. The latest deal continues a pattern of cross-Atlantic mergersbetween financial firms as they seek competitive advantage. Amongthose deals have been the Deutsche Bank AG's purchase of BankersTrust Corp., and Dutch insurer Aegon NV's acquisition ofTransamerica Corp. in 1999.

The Associated Press and Reuters contributed to this report.

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