EFG cuts expected purchase price for BSI to $1.08 billion

August 10, 2016 12:24 PM EDT

The logo of Swiss bank EFG International is seen at its headquarters in Zurich, Switzerland February 22, 2016. REUTERS/Arnd Wiegmann


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By Joshua Franklin

LONDON (Reuters) - Swiss private bank EFG International now expects to pay 1.05 billion Swiss francs ($1.08 billion) to buy rival BSI from Grupo BTG Pactual SA , almost 300 million francs less than previously announced.

EFG hopes the BSI tie-up, originally estimated to cost 1.328 billion francs, will create Switzerland's fifth biggest wealth manager behind the likes of UBS and Credit Suisse .

The bulk of the price cut relates to legal penalties for BSI over its business ties to a scandal-hit Malaysian government fund and provisions for a net reduction of BSI's assets since the end of November.

"EFG International and BSI continue to work on the preparation for the integration and expect the transaction to close in the fourth quarter of 2016," Zurich-based EFG said in a statement on Wednesday.

In the deal announced in February, there was a provision for a reduction in the purchase price if BSI suffered net withdrawals of client assets beyond a certain limit and for changes in BSI's tangible book value.

After BTG Pactual, the Brazilian investment bank selling BSI, showed outflows at BSI in the second quarter were 6.3 billion francs, EFG trimmed the expected purchase price by a further 140 million francs.

This followed an earlier price cut over penalties amounting to around 100 million francs in May from Swiss financial watchdog FINMA and Singapore authorities over dealings with a scandal-hit 1Malaysia Development Bhd (1MDB).

FINMA has also said BSI must be shut down once it has been integrated into EFG due to breaches in money-laundering rules through its business relationships and transactions linked to 1MDB. Singapore ordered that BSI's operations in the city-state be closed down.

BSI said FINMA's decision was "incorrect" and is appealing the ruling.

Swiss authorities said in February a criminal investigation into 1MDB had revealed that about $4 billion appeared to have been misappropriated from Malaysian state companies.

Investigators in several countries are trying to determine whether related transactions between 1MDB, banks and clients were funneled into the accounts of influential powerbrokers and politicians.

In a statement on Wednesday, BSI said client assets were hit by the FINMA and Monetary Authority of Singapore rulings.

(Reporting by Joshua Franklin; Editing by Adrian Croft)



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