Credit Suisse Advances Carveout of CS First Boston with USD 175 Million Purchase of The Klein Group LLC

Credit Suisse Advances Carveout of CS First Boston with USD 175 Million Purchase of The Klein Group LLC

Ad hoc announcement pursuant to Art. 53 LR

(IN BRIEF) Credit Suisse Group has acquired M. Klein & Company LLC’s investment banking business, The Klein Group LLC, for $175 million. The seller will receive a convertible note in the form of equity in CS First Boston, which is being carved out as a separate entity by Credit Suisse. Michael Klein, who was CEO of Citigroup’s institutional businesses, has been appointed CEO of Banking and CEO of the Americas, as well as designated CEO of CS First Boston. The acquisition of MK&C is expected to enhance CS First Boston’s management and advisory capabilities. The transaction is expected to close in H1 2023 and is subject to regulatory approval.

(PRESS RELEASE) ZÜRICH, 9-Feb-2023 — /EuropaWire/ —  Credit Suisse Group AG, a global wealth manager, investment bank and financial services firm, announces that it has taken a significant step forward in its plans to carve out CS First Boston as a leading independent capital markets and advisory business. The company has acquired The Klein Group LLC¹ (MK&C), the investment banking business of M. Klein & Company LLC, for a purchase price of USD 175 million.

The acquisition of MK&C, an internationally recognized investment-banking boutique with a strong reputation and deep client relationships, will enhance the management and advisory capabilities of CS First Boston. The MK&C team, which is based in New York and employs approximately 40 professionals, has advised on transactions worth over USD 1.5 trillion since its formation in 2010 and will be fully integrated into CS First Boston following the acquisition’s closing.

As part of the acquisition, Michael Klein, the founder of MK&C and a highly respected investment banker, has been appointed Chief Executive Officer (CEO) of Banking and CEO of the Americas, as well as designated CEO of CS First Boston. He will join the Executive Board of Credit Suisse and report directly to Group CEO Ulrich Körner. Michael Klein has an established track record of building leading advisory and capital raising firms and has over 35 years of investment-banking and strategic-advisory experience.

Credit Suisse’s strategy, which was announced on October 27, 2022, is to create an independent capital markets and advisory business with a differentiated proposition and partnership model. CS First Boston is expected to be more global and broader than existing investment-banking boutiques, more focused than bulge bracket players, and competitive in attracting and retaining top talent. The headquarters of CS First Boston will be in the US, with global capabilities and a preferred long-term partnership with Credit Suisse Group.

To align interests with Credit Suisse, M. Klein & Company LLC (the seller) will receive a convertible note² and a warrant. The note will provide annual payments and convert into, and the warrant entitles the seller to subscribe to, CS First Boston shares at a qualified initial public offering or other liquidity event, at the then-valuation of CS First Boston, less a customary discount³.

Axel P. Lehmann, Chairman of the Board of Directors of Credit Suisse, said: “We are very pleased to announce the planned addition of Michael Klein to our Executive Board through the acquisition of The Klein Group. Michael’s experience and leadership will further strengthen our Executive Board and will help create shareholder value through this key strategic step of creating CS First Boston as an independent global capital markets and competitive advisory led business.”

Ulrich Körner, Chief Executive Officer of Credit Suisse, said: “This acquisition of The Klein Group is an exceptional opportunity for Credit Suisse to successfully deliver on its strategic objective to carve out CS First Boston as an independent global capital markets and competitive advisory led business. This will provide meaningful additional opportunities for the Group and an attractive value proposition for all our stakeholders. We see this move as a strategic way to create shareholder value. 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. The creation of an independent CS First Boston is an important step in the wider transformation of Credit Suisse and the creation of a simpler, more focused bank built around the needs of our clients.”

Credit Suisse’s acquisition of MK&C and Michael Klein’s appointment to the Executive Board are subject to regulatory approvals, with the transaction expected to close in the first half of 2023. The transaction is expected to have a limited effect on Credit Suisse Group’s CET1 ratio of less than 10 basis points, and Deutsche Bank AG, London Branch, has provided a fairness opinion to the Board of Directors of Credit Suisse Group AG in connection with the acquisition.

Credit Suisse is committed to maintaining control over the ultimate scope and structure of CS First Boston and retains options to attract third-party capital in the future, as announced at the bank’s Strategy Update on October 27, 2022. With this acquisition, Credit Suisse takes an important step in its plans to create a leading independent capital markets and advisory business that is poised for growth and success in the years ahead.

¹The registered broker-dealer business of M. Klein & Company LLC

²The principal amount of the convertible note is expected to be USD 100 million, with the balance being paid in cash dependent on the tax consideration to be paid by the seller at closing

³The purchase price is USD 175 million. The NPV of the transaction to Credit Suisse is expected to be approximately USD 210 million which also includes interest cost, annual payments on the note and other payments that may in the future become payable in respect of this transaction.

Credit Suisse

Credit Suisse is one of the world’s leading financial services providers. The bank’s strategy builds on its core strengths: its position as a leading wealth manager, its specialist investment banking and asset management capabilities and its strong presence in its home market of Switzerland. Credit Suisse seeks to follow a balanced approach to wealth management, aiming to capitalize on both the large pool of wealth within mature markets as well as the significant growth in wealth in Asia Pacific and other emerging markets, while also serving key developed markets with an emphasis on Switzerland. The bank employs more than 50,000 people. The registered shares (CSGN) of Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.

Contact details
Kinner Lakhani, Investor Relations, Credit Suisse
Tel: +41 44 333 71 49
Email: investor.relations@credit-suisse.com

Dominik von Arx, Corporate Communications, Credit Suisse
Tel: +41 844 33 88 44
Email: media.relations@credit-suisse.com

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SOURCE: Credit Suisse Group