Proactive Investors - Scotiabank (TSX:TSX:BNS) announced it will acquire a 14.9% stake in US financial services firm KeyCorp (NYSE:NYSE:KEY) in a deal valued at approximately $2.8 billion.
The Canadian bank will purchase 163 million of KeyCorp (NYSE:KEY)’s shares at a fixed price of $17.17 per share.
The investment will be completed in two stages. An initial investment of $0.8 billion for 4.9% of KeyCorp’s stock, is expected to close in the fourth quarter.
This will be followed by an additional investment of $2 billion for approximately 10%, which is expected to close in fiscal 2025.
Scotiabank (TSX:BNS) expects the investment to boost its earnings per share in the first full year after closing the additional investment.
"This strategic investment in KeyCorp, a premier bank in the US, significantly increases the capital deployed to our identified priority markets," Scotiabank CEO Scott Thomson said in a statement.
"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.”
KeyCorp CEO Chris Gorman said Scotiabank approached the firm 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," Gorman said.
Scotiabank shares fell on the announcement, trading down 4.3% at C$61 in early trade.
Shares of KeyCorp, on the other hand, surged almost 13% to US$16.50.