UBS Sells Largest Structured Note Tied to Google in Four Years

UBS AG (UBS) sold $39.5 million of seven-year notes tied to Google Inc. (GOOG), the largest offering linked to the operator of the world’s biggest search engine in at least four years.

The callable securities, issued Feb. 11, break even when the search company rises at least 29.5 percent from its initial value of $1,183.30, according to a prospectus filed with the U.S. Securities and Exchange Commission. All principal is protected unless the bank defaults.

Google surpassed Exxon Mobil Corp. last week as the second-most valuable U.S. company, behind Apple Inc. The company’s 35 percent rise in value in less than four months is largely due to its dominance in search and Internet display advertising, said Kerry Rice, a San Francisco-based analyst at Needham & Co.

“Google has created a great tool for monetizing on the web,” he said in a telephone interview. Growth in advertising on mobile devices and on YouTube.com, which Google owns, has boosted the Mountain View, California-based company.

Needham & Co. raised its 12-month target price for Google to $1,350 on Jan. 31 after increasing it to $1,150 on Oct. 18.

Google has risen more than $300 a share to $1,202.80 since Oct. 17, when the company posted third-quarter sales that beat analyst estimates on rising ad volume.

Goldman Sachs Group Inc. (GS) also sold seven-year notes tied to Google on Feb. 11, according to data compiled by Bloomberg. The $12.5 million of callable securities pay gains if the company rises more than 29.9 percent and protect against all losses, according to a prospectus.

UBS sold $195,000 of notes tied to Google on Nov. 12, 2012, the most recent previous offering, Bloomberg data show.

Megan Stinson, a spokeswoman for UBS, and Tiffany Galvin of Goldman Sachs, didn’t return e-mails seeking comment.

Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts with values derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net

To contact the editor responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net

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