KeyCorp to Acquire First Niagara in $4.1B Merger

CLEVELAND – KeyCorp and First Niagara Financial Group today announced a definitive merger agreement under which KeyCorp will acquire First Niagara in a cash and stock transaction valued at approximately $4.1 billion.

First Niagara, headquartered in Buffalo, N.Y., has $39 billion in assets and $29 billion in deposits and 394 banking offices in New York, Pennsylvania, Connecticut and Massachusetts.  Under the terms of the agreement, which was unanimously approved by the boards of directors of each company, First Niagara shareholders will receive 0.68 KeyCorp shares and $2.30 in cash for each First Niagara common share.

Upon completion of the transaction, the combined company will have approximately $99.8 billion in deposits, $83.6 billion in loans and 1,366 branches across 15 states.  The combined company will have approximately $135 billion of pro forma assets providing increased operating leverage to deliver improved financial performance, KeyCorp said.

The per-share consideration is valued at $11.40 per share based on the closing price of KeyCorp common stock Oct. 29.  In conjunction with the closing of the transaction, three members of the First Niagara board of directors are expected to join the KeyCorp board, which will be expanded accordingly.

“Key and First Niagara are a powerful combination, driven by a shared commitment to the clients and to the communities we serve,” said KeyCorp’s chairman and CEO, Beth Mooney, in a statement.  “This transformational opportunity will bring compelling and complementary capabilities to our shared 3 million clients, while driving meaningful synergies and enhancing shareholder value.  KeyBank and First Niagara both have values-based cultures and a long-term commitment to and experience with the region.”

In his prepared statement, Nathaniel D. Woodson, chairman of First Niagara, said, “We believe that this partnership provides significant value for our shareholders and allows them to participate in the upside potential of the combined Key and First Niagara.”

Shareholders of both companies will benefit from annual cost savings in excess of $400 million from maximizing efficiencies of technology infrastructure, procurement savings across the combined organization, and optimizing overlapping branches, KeyCorp said.

KeyCorp expects the acquisition to be accretive to earnings per share in 2017, excluding one-time charges, and the transaction to deliver an attractive internal rate of return of approximately 15%.

Upon closing the transaction, KeyCorp expects to successfully integrate First Niagara into its business.

The acquisition is subject to customary closing conditions, including regulatory approvals and approval by KeyCorp and First Niagara shareholders.  It is expected to close in the third quarter of 2016.

Morgan Stanley & Co. LLC served as lead financial adviser and KeyBanc Capital Markets as financial adviser to KeyCorp.  Simpson Thacher & Bartlett LLP served as legal counsel to KeyCorp.

J.P. Morgan Securities LLC served as financial adviser to First Niagara, and Sullivan & Cromwell served as legal counsel to First Niagara.

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