Keycorp, the nation's 10th-largest financial institution, announced plans to increase its ownership stake in Electronic Payment Services Inc.
* Following regulatory approval, the Albany, N.Y.-based banking company will pay $31.6 million for a share of the company equal to those held by the other major EPS owners. Keycorp will also add a second representative to EPS' board of directors.
"In this era of rapid technological change, it's important that Keycorp aligns itself with industry leaders like EPS," said Victor J. Riley Jr., chairman and chief executive of Keycorp, which boasts $61.5 billion in assets.
EPS, a trend-setting electronic banking company with about 14,000 ATMs and 107,000 point of sale terminals, now has four owners.
EPS Pushes to Expand Reach
The deal, widely anticipated by the electronic banking community, is an outgrowth of a push by EPS to expand its ownership and spread its reach beyond the Northeast, home to most of its members' electronic banking devices.
Keycorp, with 1,300 automated teller machines in 13 northern States from Maine to Alaska, fits EPS' geographic expansion plans well. Keycorp will connect its ATMs to EPS' MAC network. EPS will drive the ATMs for Keycorp.
The deal will give Keycorp ownership of roughly 9% of the ATMs in the MAC network. Keycorp also benefits from EPS' ability to serve its needs for processing services and for new products.
The bank is one of three institutions awaiting regulatory approval of an EPS stake. The other two are Mellon Bank Corp. of Pittsburgh and National City Corp. of Cleveland.
If they become owners as expected, EPS would be owned by six financial institutions. EPS said it plans to diversify its ownership even further.
More Owners Expected
"I could see us with as many as seven or eight owners by the end of the year," said David Van Lear, chairman and chief executive of EPS. He declined to identify other potential owners.
Keycorp gained an initial foothold in EPS when it acquired Cleveland-based Society Corp. earlier this year.
One of. four institutions that formed EPS in 1992, Society held a 7% stake in EPS that transferred to Keycorp upon completion of the merger. Banc One Corp., CoreStates Financial Corp., and PNC Bank Corp. - EPS' other founding institutions - each owns 31% of the network.
Keycorp's expanded stake is expected to be approved by the Federal Reserve Board near the end of the second quarter. Mellon and National City are also expected to receive regulatory approval this summer.
Mellon will take a share equal to those of the other large stakeholders. National City has been offered an equal stake as well, but it has yet to decide whether it will opt for that share or a smaller one.
If Mellon, National City, and Keycorp are approved for equal shares, EPS' six owners would each possess 16.66% of the company.
Should National City decide to take a minority stake, the other five owners would divide the remaining portion of the company equally.
Though Mellon has agreed to pay about $2 million less than Keycorp for its stake in EPS, observers said that the price of the Keycorp share was not unfair.
"EPS adheres to a pretty strict formula to determine the price of a stake," said Richard Speer, chairman of Speer and Associates, a consulting firm based in Atlanta.
Mr. Speer said that EPS' search for additional owners is likely to focus outside the Northeast.
