By Richard A. Roth, J.D.
KeyCorp and First Niagara Financial Group Inc. have agreed to sell off 18 current First Niagara branches to convince the Justice Department to agree to KeyCorp’s acquisition of First Niagara. The branches to be sold all are in the Buffalo, N.Y. area—13 in Erie County and five in Niagara County. Also, any New York branches closed within two years of the merger will be sold to other depository institutions, the Justice Department said today.
In addition to the divestitures, the financial institutions will take steps to reduce the potential anticompetitive effects of covenants not to compete signed by bank managers. Existing covenants with New York small business and middle market relationship managers and retail regional and branch managers will be suspended, and no new covenants will be signed, for 180 days after the acquisition. In exchange, the Justice Department will advise the Federal Reserve Board, which must approve the acquisition, that it has no objections.
KeyCorp’s subsidiary banks currently operate 972 branches in 12 states, according to the Justice Department. Only branches in the Buffalo, N.Y. area are affected by the divestiture agreement. First Niagara’s subsidiary bank currently operates 394 branches in four Northeastern states, including New York. After the acquisition, KeyCorp will be the nation’s 13th largest banking organization, with more than 1,000 branches across 15 states, the Justice Department added.
Objections to acquisition. KeyCorp’s acquisition plans have given rise to a number of objections. New York Gov. Andrew M. Cuomo had asked regulators to reject the acquisition, and Sen. Charles Schumer (D-NY) has taken his concerns over job losses directly to the bank.
Additionally, a disgruntled First Niagara shareholder has filed a class action lawsuit in an effort to block the transaction. According to the suit, the price of $11.40 per First Niagara share is inadequate, directors would be improperly enriched, and rival bidders for First Niagara would be placed at an unacceptable disadvantage.
Companies: First Niagara Financial Group Inc.; KeyCorp
MainStory: TopStory AcquisitionsMergers Antitrust NewYorkNews
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