KeyCorp, Ohio's second-largest bank, has agreed to buy First Niagara Financial Group Inc. in a $4.1 billion cash-and-stock deal that extends the company's reach in upstate New York.
First Niagara shareholders will receive 0.68 KeyCorp shares and $2.30 in cash for each First Niagara share, according to a press release from the companies Friday. The per-share consideration is valued at $11.40 based on KeyCorp's closing price Thursday.
Regional bank takeovers are picking up after a slowdown in deals following the financial crisis. Lenders including BB&T and CIT Group have scooped up smaller firms to expand business lines and geographic markets as record low interest rates squeeze lending margins. New York Community Bancorp, which was reported last month to be among possible buyers for Buffalo, N.Y.-based First Niagara, on Thursday agreed to purchase Astoria Financial Corp. in a deal valued at about $2 billion.
"This transformational opportunity will bring compelling and complementary capabilities to our shared 3 million clients," KeyCorp Chairman and Chief Executive Beth Mooney said in the release.
First Niagara, with $39 billion in assets and $29 billion in deposits, was the worst-performer in the KBW Bank Index last year before it was removed from the 24-company group. The company has grappled with rising costs, including an increase in reserves to address a "process issue" that affected some deposit accounts, and has said that expenses would climb as it spends money to improve technology systems.
With about $135 billion of assets, the combined bank will be the 13th largest commercial lender in the U.S., according to the release. KeyCorp, based in Cleveland, currently has about 1,000 branches in 12 states, according to Bloomberg Intelligence.