Yet another U.S. asset management firm is falling into the hands of a European firm. Today UBS Warburg announced that it will purchase PaineWebber (NYSE: PWJ) in a deal valued at $10.8 billion. The combined firms will have roughly $1.5 trillion in assets under management.

UBS targeted PaineWebber for its leading position in the high net worth and affluent market, the company said. PaineWebber will retain its current name and brand as UBS attempts to leverage its 2.7 million U.S. clients. UBS also said that it plans to combine the firms' private client businesses and offer new products focusing on specific client segments such as entrepreneurs and executives. After the merger half of the combined firms' business will be located in the U.S. and 15 percent in Switzerland.

PaineWebber's two asset management business -- Mitchell Hutchins and DSI -- will retain their connections to PaineWebber's Private Client group. The groups will fall under the direction of Joseph J. Grano, currently president of PaineWebber. Chairman Donald B. Marron will retain his position and assume of the role of Chairman of UBS North America.

The Swiss company will pay $73.50 per share -- a 47 percent premium over the New York brokerage company's share price. Shares of Paine Webber closed yesterday at $49 15/16. Rumors of PaineWebber's impending sale of long-circulated but the firm denied them in each case. The sales price is equal to 2.4% of PaineWebber's $452 billion in assets under management.

UBS will pay for the deal half in stock and half in cash. The exchange on the two firms' stock is set at a ratio of 0.4954 UBS shares for each PaineWebber share. Shareholders of PaineWebber can elect to take their payment in stock, cash or a combination thereof.

In a statement, the two firms also said that PaineWebber's largest shareholders -- General Electric and Yasuda Mutual Life -- have each entered into agreements to vote in support of the merger. The two companies own a combined 30 percent of PaineWebber's shares. 

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