Leaked to the public three days earlier than planned, the engagement of Keycorp and Society Corp. is likely to go down as one of the worst-kept secrets in banking.

Rumors that Keycorp was about to enter into a merger of equals swirled through the market all day Friday. On the New York Stock Exchange, more than 340,000 shares of Keycorp changed hands, compared with an average 166,500.

Late Friday afternoon, as Keycorp and Society sought board approval for the deal, wire services were already running headlines that a merger might be in the works. The Saturday editions of both The New York Times and The Cleveland Plain Dealer carried stories about the deal Keycorp and Society would announce on Monday.

"We now have a great respect for the intelligence systems of the American press," said Victor Riley, chairman and chief executive of Keycorp.

Coverage Was Favorable

Observers said that the leak did little to, damage the deal. News accounts that appeared prior to the merger's announcement were positive -- even though they were evidently written without input from Keycorp and Society.

And the companies' stocks did not register any unusual gains or losses as a result of Friday's rumors. That means shareholders would have a hard time proving they suffered any damage because of the leak.

"In the final analysis, it's pretty hard to see who has been harmed here," one lawyer said.

A spokesman for the New York Stock Exchange would not comment on whether the above-average trading volume in Keycorp's stock Friday will spark an investigation by the exchange, which typically looks into trading activity it deems unusual. Under federal law, it is illegal to trade based on material, nonpublic information.

Investment Bankers Cited

On Monday, speculation about how the news got out abounded. The newspaper reports on Saturday cited investment banking sources.

Some observers faulted the companies' decision to seek board approval on a Friday afternoon for a deal they would not disclose until Monday.

In some other large mergers -- including the Chemical-Manufacturers Hanover and Bank-America-Security Pacific deals -- the boards met on Sunday, with the announcement made early the following morning.

"It's hard to keep a deal a secret for three days," one observer said.

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