KeyCorp (NYSE: KEY), the Cleveland, Ohio–based parent company of KeyBank, on Monday morning announced that the Bank of Nova Scotia (Scotiabank) (TSX: BNS) (NYSE: BNS) is buying a nearly 15 percent stake in the banking company.
KeyCorp calls the Scotiabank purchase of about $2.8 billion a “strategic minority investment,” representing about 14.9 percent pro forma common-stock ownership, for a fixed price of $17.17 per share.
KeyBank operates branches in the Syracuse area and across upstate New York. The bank ranks No. 2 in deposit market share in the 16-county Central New York region.
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“Scotiabank approached us with a unique opportunity to raise capital on attractive terms. While we continue to be comfortable with our current capital position, we determined that the investment enables Key to accelerate our well-communicated capital and earnings improvement while bolstering our strategic position,” Chris Gorman, chairman and CEO of KeyCorp, said in the banking company’s announcement. “Further, this transaction creates greater capacity for growth by enabling additional investments in targeted scale across our franchise and increases Key’s strategic agility as we navigate an uncertain environment from a position of strength. We have a proven track record of driving growth in areas such as investment banking, payments, and wealth management, and we expect to leverage our strengthened financial position to lean into these areas more aggressively.”
As part of the transaction, KeyCorp and Scotiabank plan to “explore commercial opportunities to partner together in the future to best serve their respective client bases,” per the KeyCorp announcement.
Scotiabank will purchase about 163 million shares of KeyCorp’s common stock in two pieces. The first will be an initial investment of $800 million, after which Scotiabank will own 4.9 percent of KeyCorp’s common stock. That will occur upon expiration of the antitrust waiting period under the Hart-Scott-Rodino (HSR) Act.
The second piece will be an additional investment of $2 billion, after which Scotiabank will own about 14.9 percent of KeyCorp’s common stock, upon approval by the Federal Reserve.
The parties expect to complete the initial purchase at the end of August and the additional acquisition upon the satisfaction of customary closing conditions and the receipt of Federal Reserve approval, which is expected to occur in the first quarter of 2025, KeyCorp said.
KeyCorp’s share price jumped 9.1 percent to close at $15.94 in Monday’s trading, following the news, up from $14.61 at the close of trading last Friday.
