Washington - The Justice Department late Friday dropped its antitrust objections to Key Bank of Maine's bid to acquire Casco Northern Bank.

Key Bank satisfied the department's concerns when it agreed to sell 11 southern Maine branches with $250 million of deposits as part of the deal, the agency said.

"This is yet another example of the department's flexible, yet effective, merger policy," Assistant Attorney General Anne K. Bingaman said. Consumers will benefit from continued competition, and parties to the merger get a more efficient operation, she said.

The Federal Reserve Board still must approve the merger. "The Justice Department annoucement was anticipated," a Keycorp spokesman said. "The transaction is running smoothly, and we hope to complete it by the end of February, pending final regulatory approval."

With the merger, Key Bank of Maine will control $3.5 billion of assets and operate 100 branches.

Keycorp announced in June that it would buy Casco and Bank of Vermont from Bank of Boston for $198.5 million. Keycorp, a Cleveland-based holding company, already operates branches in upstate New York. But it didn't have any offices in Vermont.

The two banks approached the Justice Department this year, allowing the department and the Maine attorney general's office to scrutinize the transaction before the banks completed the merger, said Constance K. Robinson, director of operations in the federal agency's antitrust division.

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