In buying 14.9 per cent of the Ohio-headquartered bank, Canada's Scotiabank is buying a business that covers a range of banking segments – including private banking and wealth management.

Canada’s Scotiabank announced yesterday that it has agreed to buy for $2.8 billion in cash about 14.9 per cent of New York-listed KeyCorp – which provides services including private banking and wealth management. 

Scotiabank will buy the stake by issuing common shares at $17.17 per share. This equates to an 11 per cent premium to the volume weighted average price for the last 20 trading days, the Toronto-listed bank said. 

KeyCorp, which is headquartered in Cleveland, Ohio, is a regional bank with a significant presence in the private banking and wealth management sector – as covered by Family Wealth Report in this recent interview.

Scotiabank said it will conduct the investment in two stages – investing 4.9 per cent initially and adding an investment of about 10 per cent for a total pro forma ownership of around 14.9 per cent.

The bank said the investment will be accretive to earnings per share in the first full year after its investment is completed.

"This strategic investment in KeyCorp, a premier bank in the US, significantly increases the capital deployed to our identified priority markets," Scott Thomson, president and CEO of Scotiabank, said. "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."

Subject to clearances and regulatory approvals, Scotiabank said it expects to close its initial investment in the fourth quarter of 2024 and close the second stage in the 2025 financial year.

Once the whole investment is finished, Scotiabank said it will have the right for two individuals to serve on KeyCorp's board of directors; one senior officer of Scotiabank and one third-party director designated by Scotiabank and reasonably acceptable to KeyCorp.

The Canadian bank said the initial investment, when closed, will have an impact of about 10 basis points on its Common Equity Tier 1 ratio; the second investment stage will affect the ratio by a further 40 to 45 bps.

Bank of America and Scotiabank are serving as financial advisors, and Cravath, Swaine & Moore LLP is serving as legal counsel to Scotiabank.