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Key Bank to buy First Niagara for $4.1 billion

Deal must be approved by shareholder, regulators

By:
WKBW Staff
Posted:
12:25 PM, Oct 30, 2015
  Updated:
7:47 AM, Oct 31, 2015



BUFFALO, N.Y. (AP-Modified) - KeyCorp will stretch its reach deeper into the Northeast with a $4.1 billion deal to buy First Niagara Financial Group and create the 13th largest commercial bank in the United States.

Cleveland-based KeyCorp says it will offer a portion of its stock and $2.30 in cash for each First Niagara share. The total comes to $11.40 per share based on the Thursday closing price of Key Corp's stock.

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That represents a roughly 10 percent premium to First Niagara's $10.38 closing price on Thursday. Its shares are up almost 2 percent in premarket trading before the market opens.

During a conference call Thursday morning, bank leaders spoke at length about how this deal will benefit their shareholders and how they will be able to offer more services to their combined customers. But they didn't say much at all about what this means for employees or how the transferring of customers' accounts will be handled.

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The deal, which will need to be approved by federal regulators and by each company's shareholders, is expected to close in the third quarter of 2016. The Board of Directors of each company unanimously approved the move.

Gary Crosby, President and CEO of First Niagara, said, "Combining our strengths with those of Key will enable us to even better serve customers with a broader set of product features and functionality, while providing our team members with expanded opportunities as part of a larger, more-diversified organization."

Christopher Gorman, President of Key Corporate Bank, will lead the merger integration team, which will have both Key Bank and First Niagara team members.

What does the deal mean for customers and employees?

Buffalo, New York-based First Niagara has nearly 400 locations in New York, Pennsylvania, Connecticut and Massachusetts. It has $39 billion in assets and $29 billion in deposits.

With approximately $135 billion of assets, the combined bank will be the 13th largest commercial bank headquartered in the U.S. with three million clients.

First Niagara has a market value of $3.6 billion. It began life as the Lockport Savings Bank in 1967 although the firm can trace its roots back to the early 1870s. It currently employs more than 5,000 people.

Just a few days ago, "MONEY Magazine" named First Niagara the best bank in the Northeast in its "Best Banks in America 2015-2016" rankings.

One of the goals of the merger is to save $400 million by maximizing efficiencies of technology, purchasing, and optimizing overlapping branches. That has many people wondering if that will mean job loss and branch closures in the Buffalo area.

"Considering that Key and First Niagara overlap tremendously, I would expect branch closings. I would expect back-offices to be shut down, which will mean there will be job loss," said Erie County Executive Mark Poloncarz.

KeyCorp told 7 Eyewitness News that it is still too early in the process to talk about branch closures because it would be unfair to communities, customers and employees.


http://www.wkbw.com/news/is-it-all-over-for-first-niagara-bank