KeyCorp (KEY) in Cleveland has agreed to sell its investment management and broker-dealer units.

The company said it plans to use the money it raises to buy back common stock.

A private equity fund managed by Crestview Partners will pay about $246 million for Victory Capital Management and Victory Capital Advisors, KeyCorp said Thursday. The sale price consists of $201 million in cash and a seller note with a $45 million face value. The final value of the seller note will be assessed at the end of this year. KeyCorp expects the deal to close in the third quarter.

The two businesses KeyCorp is selling generated $112 million in revenue and $88 million in expenses last year. Victory Capital Management has about $22 billion in assets under management. Victory Capital Advisors is a mutual fund distributor.

Once the deal is completed, KeyCorp will seek regulatory approval to use the funds to begin a repurchase program. Key estimates that the after-tax gain on the sale will be $145 million to $155 million.

KeyCorp management has been under pressure from shareholders and analysts to cut costs. "For Key, the divestiture is consistent with our strategic focus on businesses that leverage the competitive advantages of our core relationship banking model," Beth Mooney, Key's chairman and chief executive, said in the press release.

Morgan Stanley and Sullivan & Cromwell provided KeyCorp advice on the deal.

Crestview Partners is based in New York and has about $4 billion under management.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.