Saudi Arabia’s Crown Prince and a US private equity firm led by former CEO Barclays BCS -0.89% PLC are among investors preparing to inject $1 billion or more into the new Credit Suisse CS investment bank 9.39% to invest, said people familiar with the matter.
Crown Prince Mohammed bin Salman is considering an investment of around $500 million to support new entity CS First Boston and its CEO-designate Michael Klein, some people said. Additional financial backing could come from US investors, including Atlas Merchant Capital from veteran banker Bob Diamond, people familiar with the potential investment said. Credit Suisse previously said it had pledged $500 million from another investor it didn’t name.
Credit Suisse has received several proposals from investors interested in CS First Boston. Credit Suisse CEO Axel Lehmann told a conference Thursday that it had other firm commitments in addition to the $500 million from the unnamed investor. The bank has not received a formal offer from any Saudi company, some people familiar with the matter said.
Credit Suisse is spinning off the New York-based investment bank as part of a fresh start after being rocked by scandals, regulatory scrutiny and huge losses. It raises $4.2 billion worth of new shares that will separately make Saudi National Bank its largest shareholder. It is not clear whether Prince Mohammed would make the investment through this bank or another investment vehicle. He chairs the country’s sovereign wealth fund, the Public Investment Fund, which, along with another sovereign wealth fund, is the main owner of the Saudi National Bank.
Subscribe to Newsletter
What’s new
Catch the headlines, understand the news and make better decisions, every day for free in your inbox.
Credit Suisse shares have hit lows in recent days on the sale of new shares and a warning from the bank that customers had withdrawn $88.3 billion in investments and deposits. The stock rallied 9% on Friday after Mr. Lehmann commented that outflows had largely stopped.
Separating from CS First Boston would give the company a clean record and move it beyond Credit Suisse’s larger losses and thorny legal issues. Many of his bankers defected to competitors this year. Those who remain are promised profit sharing via a partnership model. The name revisits the First Boston brand that made Credit Suisse a fixture on Wall Street after expanding beyond Switzerland in the 1970s. Among her alumni was Mr. Diamond. Analysts say the split could be lengthy and complex.
Mr. Klein is set to lead the new firm after a career as one of the world’s most in-demand deal makers for corporates and investors. As a board member of Credit Suisse since 2018, he led a review of the investment bank’s strategy over the summer and was then tasked with leading the spin-off by the bank’s other board members.
CS First Boston’s independence could last about two years, Lehmann said Thursday at the FT Global Banking Summit. He said its balance sheet, structure and governance are being discussed with the Federal Reserve.
Mr Klein’s involvement opened the door for a potential investment by Prince Mohammed, people familiar with the talks said. Mr. Klein is a trusted adviser in the Kingdom on deals such as the 2019 IPO of state-owned oil giant Saudi Arabian Oil Co.
Prince Mohammed has encouraged Saudi investment in companies as diverse as electric vehicle maker Lucid Motors Inc., Twitter Inc., Uber Technologies Inc., Citigroup Inc. and Premier League soccer club Newcastle United, making the kingdom a growing force in the US and global.
Saudi National Bank becomes Credit Suisse’s largest shareholder with a 9.9% stake following the $4.2 billion share sale that closed this week. Chairman Ammar al-Khudairy said the investment would boost deals and bring more banking know-how to the country, and that it could also invest in CS First Boston.
Atlas Merchant’s potential investment was first reported by Global Capital. The private equity firm typically forms syndicates with other investors to acquire shares in financial companies.
While at Barclays, Mr. Diamond sought advice from Mr. Klein on the acquisition of Lehman Brothers’ US operations, a complex spin-off similar to that going on at Credit Suisse. An operating partner of Atlas Merchant, Tom King. worked with Mr. Klein at Citigroup.
Write to Justin Baer at [email protected], Margot Patrick at [email protected], and Summer Said at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the print edition of December 5, 2022 as “Credit Suisse’s New Unit Attracts Saudi”.