KeyCorp's proposed acquisition of First Niagara Financial Group Inc. has won support from Senator Chuck Schumer of New York, who had opposed the deal because of planned job losses in his state, after KeyCorp agreed to reduce its planned cuts and to hire back that many people and then some over the next few years.
Schumer, the third-ranking Senate Democrat, had opposed the transaction because of the expectation that it would cause thousands of job losses in Upstate New York. He had asked the Federal Reserve Board to give the deal extra scrutiny.
KeyCorp agreed to cut no more than 250 positions after the merger and then hire at least 500 people in the next three years, Schumer said in a written statement on Monday. That would amount to a net addition of jobs by 2021, the statement said. The deal was struck over the weekend with Schumer and Representative Brian Higgins, the Democrat who represents Buffalo, First Niagara's hometown.
David Lanzillo, a spokesman for First Niagara, didn't immediately respond to phone and e-mail requests for comment. Tim Walsh, a spokesman for KeyCorp, didn't have an immediate comment when reached by phone. KeyCorp's agreement with the New York lawmakers was reported earlier on Monday by The Buffalo News.
Governor Andrew Cuomo of New York has also voiced disapproval of the deal. In a February letter to the Fed, Cuomo said the merger would reduce competition in Upstate New York, constrict consumers' access to bank services and cause job losses. In April, KeyCorp agreed to divest 18 branches to secure antitrust approval for the acquisition.
For a look at Governor Cuomo's efforts to block the KeyCorp-First Niagara deal, click here.
KeyCorp still needs approval from banking regulators to consummate the purchase. The holding company merger application is before the Fed, and the banking unit merger application awaits approval from the Office of the Comptroller of the Currency. Spokesmen for the two regulators declined to comment on the status of the applications.
The bank also has to contend with a Justice Department investigation into First Niagara's minority-lending practices dating to 2014.
The New York senator's involvement in the process reflects the senior Democrat's clout in the banking industry. Although Schumer has no official say in approving the acquisition, his seat on the Senate Banking Committee — and the possibility that he might emerge as the next Senate majority leader after the November elections — give him sway over the deal.
It's not the first time that a powerful lawmaker's support has influenced a bank deal. In 2004, when Bank of America announced plans to acquire Boston-based Fleet Financial, then-Representative Barney Frank, Democrat of Massachusetts and a member of the House Financial Services Committee, extracted commitments from the Charlotte, North Carolina-based bank that it would maintain its support for affordable housing in the state.
Following the acquisition of Fleet, Bank of America laid off 1,400 employees and moved two lines of business out of state, drawing criticism from Frank and state officials.
Schumer voiced his concern about the KeyCorp-First Niagara deal in December, when he urged the Federal Reserve Board, which is overseen by the Banking Committee, to extend the public comment period to address the overlap in the two banks' Upstate New York operations.
KeyCorp's original plan involved the elimination of about 1,000 of First Niagara's roughly 3,400 positions in Upstate New York, according to the people familiar with the matter, who asked not to be named because the discussions were confidential. The banks employ roughly 6,100 people combined.
It's not clear what impact those revised job numbers would have on the profitability of the deal. KeyCorp's offer of $4.1 billion to buy First Niagara was calculated, at least in part, on the basis of the savings that could be realized by combining the banks' operations throughout New York.
If the deal proceeds, it would increase Cleveland-based KeyCorp's assets by about $40 billion, to $133 billion. The combined company would probably be among the top 20 U.S. banks by assets, according to data compiled by banking agencies.