Updated from 7:21 p.m. EDT

Swiss banking giant

UBS

(UBS) - Get Report

is working on an agreement to acquire

PaineWebber

( PWJ) for $73 a share, or about $12 billion, according to

FT.com

.

FT.com, the Web site of the

Financial Times

newspaper, said PaineWebber's board was expected to vote on the deal on Wednesday. The deal would involve UBS paying both cash and stock, the Web site reported.

PaineWebber closed Tuesday at 49 15/16 a share, up 8%, or 3 13/16. A PaineWebber spokesman didn't return a call seeking a comment.

PaineWebber has long been considered a takeover target, in part because it wasn't considered strong enough to go it alone. The firm has a strong retail brokerage force but lacks investment banking. And it has continued to pursue its retail focus. In late April it agreed to spend $620 million in cash to buy Nashville, Tenn.-based J.C. Bradford, which is adding about 900 brokers to PaineWebber's 7,608 brokers.

FT.com said some people within UBS favored buying an investment banking boutique that specializes in technology stocks. But the firm also has said it was interested in moving into the retail brokerage arena.

While the lure of investment banking likely is strong for the European giant, the U.S. opportunities are few. Tech banking boutiques from the former

Montgomery Securities

to

Hambrecht & Quist

to tiny

Volpe Brown Whelan

were taken over by large banking and brokerage institutions during the past few years. Their successors, such as

Thomas Weisel Partners

(built by Montgomery founder Thomas Weisel), aren't considered on the block.

But if UBS does acquire PaineWebber, it most likely will try to build its own investment banking operation with selective hiring from the ranks of the tech boutiques. For instance,

UBS Warburg

, UBS' investment banking arm, recently hired Jim Feuille, the former head of Volpe Brown's technology banking effort, according to trade publication

Tech Finance News

.

Feuille, who is highly regarded among Silicon Valley bankers, plans to build UBS Warburg's corporate finance staff to 75 from about 30 professionals. While that still wouldn't be as large as the operations at competitors like

Goldman Sachs

(GS) - Get Report

and

Chase H&Q

, neither of those firms have the ability to distribute IPOs broadly to retail investors, which PaineWebber would bring to UBS.

In addition, the retail brokerage business appears to be the most stable part of the securities industry, rising from the stepchild status of the '80s. Firms such as

Merrill Lynch

( MER),

Citigroup's

(C) - Get Report

Salomon Smith Barney

unit and PaineWebber are using their big brokerage forces to generate more revenue from money-management fees, which often are more stable than commissions and investment banking fees.

According to a recent report from PaineWebber's top executives, the firm's client assets grew to $423 billion in 1999 from just $74 billion in 1990. More importantly, in the past three years, fees generated by money-management products grew 28%.

"Our focus continues to be on increasing assets in fee-based accounts, because we think that is a stable revenue stream which reflects a closer relationship with our clients," said the briefing statement from Donald Marron, PaineWebber's chairman and CEO.

Marron is considered a wild card in any potential deal. He cobbled PaineWebber together from the acquisitions of several smaller firms over the past two decades, and analysts and industry insiders have long considered his unwillingness to turn over the reins an obstacle to any deal. As an overseas partner, UBS, however, might need someone like Marron to run its U.S. operations.