KeyCorp hopes to finish acquiring First Niagara Financial Group sometime between the start of July and the end of September.
Between now and then, the two banks have work to do.
Shareholders need to vote.
Regulators need to approve the deal.
And as the process unfolds, a governor and some powerful federal lawmakers are trying to stop the purchase. Several shareholder lawsuits also have challenged the deal.
Here is what is ahead:
The Key-First Niagara deal won’t go anywhere without shareholder approval. The banks recently mailed them proxy cards, along with details of the deal.
Each bank has scheduled a special shareholders meeting for the same date: March 23. First Niagara’s will be at its Buffalo headquarters, while KeyCorp’s will be in Cleveland.
Only shareholders who have owned the stock since Feb. 1 or earlier are eligible to vote. They can cast ballots in person at the meeting, but can also vote via phone, Internet or regular mail. (First Niagara shareholders also have the option of voting by scanning the QR code on the proxy card with a mobile device.)
A special shareholders meeting is different from a bank’s annual meeting, where executives review results and look ahead. First Niagara does not plan to hold an annual meeting if the Key deal goes through as planned in the third quarter. The bank said it could still schedule one for 2016 in the case the Key deal fails to close in the third quarter, or at all. KeyCorp has scheduled its annual shareholders meeting for May 19 in Cleveland.
Institutional shareholders and mutual fund holders will hold great sway in the vote: They own 83 percent of Key’s stock, and 80 percent of First Niagara’s.
The dollar value of the deal remains in flux. The value – currently about $3.5 billion – is tied to Key’s share price, which has fallen since the deal was announced in October.
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Federal regulators are just as essential to the approval process as the shareholders. No one can say when the regulators might make their decisions.
The Federal Reserve doesn’t comment on its review process. In the case of M&T’s deal for Hudson City, the Fed made its most extensive public comments at the end, when it announced approval.
The Federal Reserve analyzes factors such as the impact on competition, the two banks’ effectiveness in fighting money laundering, and the “convenience and needs of the communities to be served,” including their Community Reinvestment Act ratings.
As a result of Dodd-Frank, the Federal Reserve also considers the “financial stability” of a bank post-merger. That factor was added after the financial crisis, in an effort to avert threats to the nation’s economy.
The Federal Reserve is reviewing the application for the merger of the two holding companies. But the Office of the Comptroller of the Currency, which is part of the Treasury Department, also has a role. It supervises national banks and federal savings associations, and is deciding the application to merge the two institutions’ banking subsidiaries. The OCC reviews many of the same factors as the Federal Reserve.
The Justice Department’s antitrust division will evaluate whether the deal would reduce banking competition. Banks can resolve those concerns by agreeing to sell off a number of branches to rivals. The Justice Department must sign off on whoever buys branches as “completely suitable.”
First Niagara CEO Gary Crosby recently said the Justice Department has “a long-standing process that they use to make sure competition is preserved in a market and it’s not hurt.”
He added: “I’m confident we’ll move that process smoothly and we’ll satisfy the concerns around competition, maintaining competition, and then move forward with the (Federal Reserve) and (OCC) regulatory approval after that. Because the Fed won’t approve a merger until the (Justice Department) has signed off on branch divestitures.”
The Federal Reserve Bank of Cleveland collected public comments on the deal through the end of January. A number of Cleveland-based nonprofits wrote letters praising Key for its support of their work.
Some Buffalo-area community groups raised objections, pointing to potential job losses, reduced competition and fewer branches in low-income areas. The Western New York Law Center and PUSH Buffalo have called on Key to detail its plans for Western New York if the acquisition goes through.
On rare occasions, the Federal Reserve has held public meetings to gather more comments about a deal. One such meeting was held in February 2015, about CIT’s $3.4 billion planned purchase of OneWest. The Federal Reserve declined to comment on whether it will hold a public meeting about the Key-First Niagara deal.
The OCC just finished collecting comments, as well.
The banks have formed integration teams with representatives from both banks in a variety of departments to look at how to bring their operations together. The teams report their progress to Christopher Gorman, a Key official, who then reports to Crosby and Key’s CEO, Beth Mooney. Still to be announced is how many jobs and how much office space the combined operations will need in Western New York.
Several elected officials – including U.S. Sen. Charles E. Schumer, U.S. Rep. Brian Higgins, Assemblyman Michael Kearns, County Executive Mark C. Poloncarz and Gov. Andrew M. Cuomo – have raised concerns about the deal. They worry it will spur significant job cuts and branch reductions, hurting the Buffalo Niagara economy.
Schumer spoke to Mooney about the deal after it was announced. Schumer is the ranking Democrat on the Senate Banking Committee, is poised to become the next leader of the Democrats in the Senate.
Cuomo has called for regulators to block the deal, and threatened possible legal action if the deal is approved.
Analysts doubt the lawmakers’ objections will block the deal. But elected leaders clearly want to keep the issues of jobs and branches at the forefront as Key develops its plans and prepares to make greater inroads in Western New York.
Several class-action lawsuits have been filed challenging the deal on behalf of shareholders. Such lawsuits are commonly filed when deals like this one are announced, and Key officials, such as Mooney, have said they are not concerned the lawsuits will derail their plans.