UBS Group AG (NYSE:UBS) is eyeing talks to unwind a deal which would have seen Michael Klein gain control of part of Credit Suisse's investment bank, according to a report.
The talks suggest UBS sees some value in Credit Suisse's investment banking arm, having just agreed a deal to acquire its embattled rival for US$3.25bn.
The deal with Credit Suisse would have seen Klein merge his advisory firm with the Swiss bank's investment banking division to create CS First Boston. The First Boston brand takes the name of a US investment bank Credit Suisse absorbed in 1990.
However, the Financial Times reported that some UBS executives believe the terms of the deal are too favourable for Klein. Klein would have owned a minority stake in the new entity, with Credit Suisse owning a larger holding.
"We assume he [Klein] is cherry picking. The deal was done when the selling bank had a gun held to its head and we are no longer in that position," a source close to UBS said, according to the FT report. "We are not here to enrich Michael Klein at the expense of our shareholders."
UBS has now assigned a legal team to examine how to void the contract Credit Suisse signed with Klein in the cheapest way possible, the people said. In particular, it is reviewing whether it can scrap or negotiate down a break-up fee owed to Klein.
However, if it cannot, one person said, the costs to activate the break clause would not be material.