Scotiabank's investment in KeyCorp expands its North American presence with a 14.9% ownership stake
Scotiabank has entered into an agreement to acquire an approximate 14.9 percent pro-forma ownership stake in KeyCorp for approximately US$2.8bn.
The acquisition will be executed through an issuance of common shares priced at $17.17 per share, representing an 11 percent premium to the volume-weighted average price for the last 20 trading days.
The investment by Scotiabank will be completed in two stages:
- an ‘Initial Investment’ of 4.9 percent, recorded as an equity investment at fair value
- an ‘Additional Investment,’ which will increase Scotiabank’s stake by approximately 10 percent, reclassifying the total stake as an investment in associate.
Upon completion of the Additional Investment, Scotiabank will have the right to appoint two directors to KeyCorp's Board: one senior officer from Scotiabank and one third-party director designated by Scotiabank, who will be reasonably acceptable to KeyCorp.
The investment is expected to be accretive to Scotiabank's earnings per share within the first full year following the closing.
The impact on Scotiabank’s CET1 ratio is estimated to be approximately 10 basis points at the closing of the Initial Investment, with an additional impact of 40 to 45 basis points anticipated at the closing of the Additional Investment.
Scott Thomson, president, and CEO of Scotiabank, emphasized the significance of this strategic move, stating, “This strategic investment in KeyCorp, a premier bank in the US, significantly increases the capital deployed to our identified priority markets.”
He continued, “We believe that this transaction provides attractive near-term returns to our shareholders and creates future optionality for Scotiabank in the North American corridor, given our unique position as the only Canadian bank with a presence across Canada, the US, and Mexico. We look forward to exploring mutually beneficial strategic opportunities in the future.”
In light of this transaction, Scotiabank intends to suspend the discount on its Shareholder Dividend and Share Purchase Plan, effective for dividends declared after the expected August 27, 2024, declaration. Consequently, the upcoming dividend will be the last one eligible for the discount.
KeyCorp, a US-based financial services company, operates across 15 states with US$187bn in assets and around 1,000 branches. The company offers a range of commercial and retail banking, investment advice, and services.
