) has decided to sell-off its investment management subsidiary,
Victory Capital Management and broker dealer affiliate Victory
Capital Advisers. The company signed a deal with Crestview
Partners - a private equity firm - to vend the subsidiary for
$246 million in cash and debt.
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KeyCorp stated that out the total sale price, $201 million is in
cash, while the remaining $45 million is a seller note, whose
final value would be determined by the end of the year. The
company anticipates, upon closing, the deal will lead to
after-tax gain in the range of $145-$155 million.
The transaction though consented by the board of directors of
Victory Mutual Fund is still subject to customary closing
conditions and approvals of the Victory Mutual Fund shareholders
and certain investment advisory clients. Moreover, the sale is
expected to be completed by the end of the third quarter of 2013.
Morgan Stanley & Co. LLC - a unit of
) - acted as a financial advisor, while Sullivan & Cromwell
LLP provided legal advice to KeyCorp for this deal.
KeyCorp intends to utilize the gain from the sale to the
subsidiary for repurchasing shares and would seek regulatory
approval for the same. Earlier in Mar 2012, following the
approval from the Federal Reserve, as part of the Comprehensive
Capital Analysis and Review, the board of directors of KeyCorp
authorized a share repurchase program of up to $344 million, to
be completed by Mar 31, 2013.
As of Dec 31, 2012, KeyCorp bought back shares worth
approximately $256 million. The company has $88 million worth of
buyback authorization remaining under the current program.
KeyCorp's decision to vend its subsidiary is a part of its
strategy to focus on the core banking operations. Further, this
would enhance investors' confidence in the stock, as the company
plans to utilize the cash to meaningfully deploy capital.
Currently, KeyCorp retains a Zacks Rank #3 (Hold). However, other
major regional banks,
State Street Corporation
) carry Zacks Rank #1 (Strong Buy) and #2 (Buy), respectively and
are worth considering.