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Julius Baer Shares Drop Amid Heightened EFG Deal Speculation

(Bloomberg) — EFG International AG shares spiked after a report on market speculation that Julius Baer Group Ltd. may soon announce a takeover of its rival.

The private bank’s shares rose as much as 10% and were halted earlier on Thursday due to excessive volatility, after website Inside Paradeplatz reported rumors that an announcement could come on Friday after the market closes. Julius Baer shares fell as much as 6.7% after the report.

Representatives for EFG and Julius Baer declined to comment when contacted by Bloomberg News.

Bloomberg reported in late May that Zurich-based Julius Baer had held preliminary discussions with EFG in recent weeks about the possibility of a combination, according to people familiar with the matter. Talks have been on and off, and there’s no certainty they will result in a transaction, the people said. 

Any deal between the two banks would create a wealth manager with more than 500 billion Swiss francs ($561 billion) in assets under management. It would continue the transformation of the Swiss financial industry that was kicked off last year when the country’s largest bank, UBS Group AG, bought rival Credit Suisse in an emergency takeover.

The speculation left analysts divided. In a note titled “This Time Feels Different,” KBW’s Thomas Hallett said a deal would “make financial sense.” The analyst’s calculations assume a purchase price of 4.5 billion Swiss francs and 30% in cost savings that should help deliver a return on investment of 10% by 2027. 

A transaction could also help solve Julius Baer’s search for a permanent chief executive officer after the exit of Philipp Rickenbacher, the KBW analyst wrote, pointing to EFG CEO Giorgio Pradelli as a possible candidate. Rickenbacher stepped down earlier this year as a consequence of the bank’s exposure to the Signa property empire. 

Investors might also welcome the return of former Julius Baer CEO Boris Collardi “in some capacity,” according to KBW. Collardi became a member of EFG’s board in 2022. 

Citigroup analyst Nicholas Herman, meanwhile, wrote in a note that Baer’s share price drop reflected unattractive returns from a possible deal, as well as departures of relationship managers and client money. 

(Updates with analyst commentary.)

©2024 Bloomberg L.P.

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