Activist Arnold calls truce with UBS -sources
By John O'Donnell and Lisa Jucca
ZURICH, Sept 25 (Reuters) - Activist investor Luqman Arnold has called a truce with UBS (UBSN.VX) management, sources with direct knowledge of the matter told Reuters, as the embattled Swiss bank weighs if a sale of its investment bank is possible.
Last April, Arnold's investment company Olivant started agitating publicly for the separation of the bank's key wealthy clients business from the investment bank that plunged it into crisis.
Now the former Chief Executive of UBS has pledged not to criticise the bank or push for further change publicly in a truce with chairman Peter Kurer after he restructured the group to make a sale of investment banking possible.
As one of UBS's biggest investors with a stake of almost 3 percent, Arnold's blessing is significant as Kurer prepares for a shareholder meeting on Oct. 2 to outline progress in rehabilitating the bank hobbled by markets turmoil.
"Arnold's campaign has worked -- he has got what he wanted," said one person close to Arnold.
"Kurer has delivered on the strategic direction, which is a focus on wealth management and separation of investment banking," said another source. "There is very little to complain about."
Arnold and UBS declined to comment.
Arnold's extension of this olive branch to Kurer comes as UBS mulls the future of its three pillars -- banking for the rich, investment banking and asset management.
"The separation of the divisions provides a basis for exercising strategic options and the chairman has signalled his receptiveness to taking advantage of such opportunities," Olivant said in a recent statement on its website.
HARD SELL
But selling financial assets now would be difficult shortly after the collapse of Wall Street titan Lehman Brothers (LEHMQ.PK) and rescue of insurer American International Group (AIG.N) rattled the markets.
Investors are still waiting nervously for details of a U.S. government bailout for Wall Street.
"With the investment bank, there are three options," said the second source, who has detailed knowledge of UBS's thinking.
"One option is to sell it. That looks difficult right now. Or you close it -- that also looks difficult in the current markets unless you stay on the hook for liquidity."
"The third option is you merge it. You could still keep a minority position," he said, adding that a sale was the most likely option. "If UBS wanted to keep a small stake, they could."
The crisis sparked by the collapsing U.S. housing market had claimed the Swiss bank as its biggest casualty in Europe but has gone on to wreak far bigger damage on Wall Street.
Last month, Kurer and UBS Chief Executive Marcel Rohner unveiled the separation of the troubled investment bank from its prized wealth management arm, paving the way for a possible sale of the business that cracked its rock-solid image.
"It could make sense to run the two together if you get it right, but UBS got it wrong," said one person with detailed knowledge of the bank's strategy.
"It still could make sense -- if it was much smaller and if the investment bankers could get into the service-providing business and not thinking they are masters of the universe." (Editing by Hans Peters)
