As part of its focus on North American business, Bank of Nova Scotia (BNS.US) has agreed to acquire a minority stake in KeyCorp (KEY.US) for approximately $2.8 billion.
As part of its focus on North American business, Bank of Nova Scotia (BNS.US) has agreed to acquire a minority stake in KeyCorp (KEY.US) for approximately $2.8 billion. KeyCorp is one of the most severely affected regional banks in the United States during last year's turmoil. The KeyCorp stock price rose 18.07% before the market opened to $17.25.
In a statement on Monday, Bank of Nova Scotia said it will acquire 14.9% of KeyCorp's stock at a price of $17.17 per share, which is 11% higher than the volume-weighted average price of the past 20 trading days.
The Bank of Nova Scotia CEO said the investment "significantly increases our capital deployment in identified core markets". Bank of Nova Scotia operates in Canada, the United States, and Mexico, while KeyCorp owns approximately 1,000 branches in the United States, providing commercial and retail banking, investment consulting and services, and managing approximately $187 billion worth of assets.
KeyCorp is considering restructuring its balance sheet to shorten the term of some of its investment portfolio. This move is reminiscent of a year ago when the rapid interest rate hike by the Federal Reserve caused bond investments of creditors to be severely hit, leaving creditors with book losses, and investors began selling KeyCorp and its many competitors.