The Swiss Terminator: Arnold is back at UBS

There's some great boardroom intrigue brewing at UBS, where old adversary Luqman Arnold has returned to the fray...

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Last Updated: 31 Aug 2010

Arnold, who tried to buy Northern Rock last year, has accumulated a 0.7% stake in UBS through his investment vehicle Olivant – and is now agitating for a break-up of the beleaguered Swiss bank. Arnold used to be the chairman of UBS’s group executive board, but was ousted in 2001 after falling out with all-powerful chairman Marcel Ospel (no, that's not the guy who presents 'This is Your Life'). However, now Ospel has been forced to quit after $37bn of sub-prime losses, Arnold has seized the opportunity to get back in the frame.

The Olivant chairman has written to UBS vice chairman Sergio Marchionne seeking a meeting ‘to discuss his concerns regarding recent developments’, arguing that there are ‘fundamental issues [which] UBS needs to act with urgency to address.’ Specifically, he wants the bank to sell off its asset management arm and separate its investment bank and private banking units – while overhauling its corporate governance, capital planning, corporate strategy, risk discipline, and general communication. So – pretty much everything, then…

The major issue, he reckons, is that UBS concentrates too much power in the hands of the executive chairman – which he probably knows from bitter experience, after losing out to Ospel in that 2001 power struggle. He’s also unhappy that Ospel is being replaced by general counsel Peter Kurer, suggesting that he lacks the skills for the job and will ‘perpetuate UBS’s ineffective corporate governance and insular culture’. And since this is what Citigroup did when they appointed Chuck Prince, he may have a point.

Instead he wants Marchionne to take over as non-executive chairman and find ‘an outstanding Swiss banker with proven strategic, risk management and communications skills’ to run the bank. ‘There is an urgent requirement for effective and relevant leadership of UBS’s Supervisory Board,’ he growled today. (We hear Adam Applegarth’s available?)

So it looks as though after six years of patiently biding his time, Arnold is now set to prove that revenge is a dish best served cold. Apparently he’s already sitting on a tidy profit on the stock he’s bought so far – and if he succeeds in his break-up scheme, he could make a killing. What’s more, he gets to make life horribly uncomfortable for the board that forced him out in the process. All the hallmarks of a great investment.

We reckon those UBS directors will be feeling slightly nervous today – after all, as we know, terminators called Arnold can't be bargained with, can't be reasoned with, and absolutely will not stop, ever, until you are dead...

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