Updated from 7:32 a.m. EDT

In a half-stock, half-cash deal valued at $10.8 billion, Swiss investment bank

UBS

(UBS) - Get Report

will buy New York-based

PaineWebber

( PWJ), the companies said Wednesday.

UBS said it would pay $73.50 a share, a 47% premium to PaineWebber's Tuesday closing price, although the price shot up over 8% on the day on rumors of an imminent takeover.

PaineWebber finished up 16 15/16, or 34%, at 66 7/8. UBS closed down 13 9/16, or 9%, at 135 3/16. Both stocks also trade in Germany.

Under the terms of the deal, UBS will pay half in cash and half in UBS stock, at a ratio of 0.4954 UBS shares for each PaineWebber share. Based on Tuesday's closing price, the deal represents a multiple of 18.1 times PaineWebber's estimated 2000 earnings.

Both

General Electric

(GE) - Get Report

and

Yasuda Mutual Life

, PaineWebber's two largest shareholders who together

own about 30%, have entered into agreements with UBS to vote in favor of the merger.

The transaction is expected to boost UBS' earnings per share beginning in 2001.

PaineWebber, the fourth-largest U.S. brokerage, will continue to operate under its brand name. The deal must still garner approval from both companies' shareholders, and is expected to close by November.

The story was originally

reported by

FT.com

Tuesday. The story was also reported

Wednesday by

The New York Times

.

Separately, PaineWebber announced Wednesday that its second-quarter earnings beat Wall Street estimates. It said earnings per share for the quarter that ended June 30 were 95 cents a share, up 3 cents from the 92-cent Wall Street consensus, according to

First Call/Thomson Financial

. Still, it was a 10.5% decrease from last year's second-quarter earnings per share of $1.02.

The company said its net income was $146.3 million, compared to $163.5 million in the same period last year. Revenues for the quarter were $1.411 billion, an increase of 4.7% from the $1.348 billion generated in last year's second quarter.

The company said the earnings figures were before costs associated with its merger of

J.C. Bradford & Co

, which will bring final profit figures down $30 million, or 13 cents per share.