At a cost of $45 billion, KeyCorp (NYSE:KEY) is just about to conquer the acquisition of First Niagara Financial Group Inc. (NASDAQ:FNFG) even as the merger-related charges threaten to rise. The related charges come during the second quarter of the company’s operations and apparently, they are almost double what the company spent acquisitions during the first quarter. The company says the charges have had a serious effect on its net income which has declined with a 16.1%
The company has also suffered a drop down in its net income attributable to common shareholders from $230 million of a comparable quarter a year-ago to $193 million. Nevertheless, the corporation is still determined to acquire the Buffalo-based financial group in the deal that is expected to close Aug. 1. While this happens, the status quo of a merger between KeyBank N.A. and First Niagara Bank N.A is still hanging in the balance. Word has it that the two are still waiting for approval from the U.S. Office of the Comptroller of the Currency.
About KeyCorp and what to expect
The Corporation will be closing 106 KeyBank and First Niagara retail branches that are within New York State. But on the other hand, it has presented a plan that restricts acquisition-related layoffs of employees that will be affected by a closure of some of its branches.
A lot has been spent in line with the acquisition. The expense of $35 million of the purchase price was attributed to personnel costs which were grouped under the cost of technology development. The amount was also allocated the cost of retaining employees as they took through the acquisition process. Surprisingly, KeyCorp is planning to position its Northeast regional headquarters in Buffalo’s Larkinville neighborhood.
What others think about KeyCorp’s acquisition deal
The deal may not succeed after all. Key political figures the likes U.S. Sen. Charles Schumer and Gov. Andrew Cuomo are opposing it citing that it would demoralize the retail banking industry. In a letter to Federal Reserve and the U.S. Department of Justice Cuomo called for the blocking of the acquisition deal.
Other concerns indicate that the First Niagara shareholders are not being given a fair share of the deal.