UBS, Switzerland's largest bank, shelved the planned sale of its private equity arm yesterday and announced the departure of the unit's chief executive, the son of the Union Bank of Switzerland's former chairman. The development underscores the impact of the weak new issues market on the investment banking industry.
UBS Capital's private equity portfolio is valued at more than £2bn, and includes investments in Hogg Robinson, the travel agent, Campari, the Italian drinks firm, and Budget Rentacar. It is best known for buying Rizla in 1994 and selling it on to Imperial Tobacco three years later.
The unit's Swiss parent had planned to sell 80 per cent of the business in the next three months to a buyout team led by Pierre de Weck, the 50-year-old son of Philippe de Weck, the bank's former chairman. He is being replaced by Markus Granziol, chief executive of Warburgs, UBS's securities operation. The partial sale collapsed after UBS indicated it wished to delay making fresh private equity investments amid continuing difficulties in obtaining decent sale prices for assets. UBS Capital lost the group £110m in the first quarter, although it is forecast to post a profit for the year as a whole.
The delay is bad news for other banks with large private equity portfolios, such as Goldman Sachs and Credit Suisse First Boston. In the tech-share boom of 1999 and 2000, many banks made substantial investments in infant New Economy companies with a view to floating them on the stock market. Since then, demand for new issues has collapsed, reaching an all-time low in the first half of this year according to a recent survey by KPMG. That has made huge asset writedowns a feature of investment banking results statements this year.
Stock market analysts have repeatedly deferred the predicted date of recovery in the new issues market, with most now saying it will not come until next year.