Canadian big six bank says deal should provide near-term returns for shareholders
Scotiabank has agreed to acquire a stake of around 14.9% in US financial services firm KeyCorp.
The Canadian big six bank will pay $17.17 per common share, a premium of around 11% to the volume weighted average price of the past 20 days, amounting to an investment of approximately US$2.8 billion.
KeyCorp has assets of around $187 billion and operates in 15 US states through a branch network of 1,000 offering commercial and retail banking and investment advice and services.
Scotiabank will make an initial investment of 4.9% with a further 10% investment later, together expected to be accretive to earnings per share in the first full year following closing of the additional investment. The transaction is expected to close in the fourth quarter of 2024.
"This strategic investment in KeyCorp, a premier bank in the U.S., significantly increases the capital deployed to our identified priority markets," said Scott Thomson, president and CEO of Scotiabank. "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."
Once the deal closes, Scotiabank will be entitled to two places on KeyCorp’s board of directors which will include a senior officer of Scotiabank and a third party director designated by the Canadian banking group.
At this time, and until such time that Scotiabank elects otherwise, it intends to suspend the discount on its Shareholder Dividend and Share Purchase Plan effective for dividends to be declared subsequent to the declaration expected on August 27, 2024. Consequently, this will be the last dividend that will be eligible to participate in the discount.
