Goodbye Credit Suisse. UBS has agreed to acquire the struggling bank for $1 billion $2 billion $3.25 billion (after first making a couple of lowball offers). The final acquisition price is less than half of Credit Suisse’s market cap at Friday’s close, which reflects the fact that its balance sheet has more holes in it than a piece of Swiss cheese.

The lowdown

• 🗝️ UBS to acquire Credit Suisse for $3.25 billion after a weekend of negotiations.

• ⏩ Berkshire Hathaway increases pace of share buybacks implying view that the company is undervalued.

• 🇨🇳 Deloitte fined $31 million by Chinese Government for auditing negligence.

Flex your finance muscle

AT1 bonds

Saudi National Bank did poorly out of its investment in Credit Suisse, but the investment did not go to zero. AT1 bondholders, on the other hand, were totally wiped out. 

An additional tier 1 (AT1) bond is a type of ‘contingent convertible’ bond that has features that allow it to convert to equity or be written down in certain circumstances. AT1 bonds were born of the Basel III regulatory framework, which sets out rules for the amount and quality of capital that banks must hold to withstand financial stress. They are high-risk instruments because they have no fixed maturity date, and their interest payments are usually discretionary.

What’s really interesting here is that this is a case where debt holders have been vaporized before equity holders – pretty much unheard of – which has left some people rather annoyed.

Here is a more detailed explainer.

Featured stories

Shipping companies pay huge dividends

Shareholders in two of the world's largest publicly listed container shipping companies, AP Møller-Maersk and Hapag-Lloyd will need a shipping container to store the multibillion-dollar dividends the companies intend to pay them ($). The combined dividend payout is $22.6 billion – 33 times higher than 2019.

Profits rose in the shipping industry due to increased demand for online shopping during the pandemic and supply chain bottlenecks, but the bumper dividends have been assisted by an ultra-low tax rate. 

The shipping industry enjoys low tax rates, owing to the way levies are calculated. While profits soared, the effective tax rate for shipping companies has fallen. Hapag-Lloyd's tax payments were equivalent to just 1% of pre-tax profits in 2022. The industry was exempted from an agreement on a global minimum 15% corporate tax ($). Pirate ships are not the only vessels that are good for plundering.

The content we're consuming today

• NY Times: HelloFresh to Stop Buying Coconut Milk From Thailand Amid Claims of Monkey Labor ($).

• Odd Lots podcast: What the dramatic boom in zero-day options means for stocks.

Off-balance sheet items

• Take a look at the trailer for the new Super Mario Bros movie. We linked to it on Friday, but you really need to listen to this podcast about the history of Nintendo and how Mario only exists because they couldn’t get the rights to Popeye.

The bottom line