First Niagara's Sale to KeyCorp Draws Resistance From Cuomo

  • The deal `would have a devastating impact,' the governor says
  • Analyst: Lawmakers almost never succeed in stopping bank deals

KeyCorp hit fresh political resistance in New York to its $4.1 billion acquisition of First Niagara Financial Group Inc., with Governor Andrew Cuomo pushing federal regulators on Wednesday to block the deal. Shares of both companies fell.

A takeover “would have a devastating impact on consumers and businesses in upstate New York, and I urge the federal government to reject the application,” Cuomo wrote in a letter posted on his website. “This proposal would reduce retail banking competition, limit consumer access and convenience, and ultimately eliminate jobs throughout the region.”

KeyCorp, based in Cleveland, agreed in October to take over Buffalo, New York-based First Niagara to expand in the U.S. Northeast. In December, Senator Charles E. Schumer of New York pressed regulators to give people more time to comment on the deal, citing his concerns about its economic impact on the region.

First Niagara’s stock fell 1.7 percent to $9.16 after Cuomo weighed in Wednesday. KeyCorp slipped 1.1 percent to $10.52.

‘Strong Commitment’

KeyCorp said in a statement that it has demonstrated a “strong commitment” to New York since the company’s founding there in 1825, and that the state already accounts for more than a fifth of the firm’s business.

“By further investing in New York we will increase our ability to better serve the people, businesses and communities of this state,” it said. “We look forward to working with Governor Cuomo and his staff to address their concerns and share our commitments.”

David Lanzillo, a spokesman for First Niagara, declined to comment.

It would be a rare feat for a governor to derail a bank merger, Gerard Cassidy, an analyst at RBC Capital Markets, wrote in a note to clients.

“Since 1996, over 7,800 bank deals have been announced,” Cassidy said. “In that time we do not ever recall a deal falling through due to objections from elected politicians.”

First Niagara had said in a regulatory filing earlier in the day that if the merger falls apart the company still faces costs connected to the deal, including a potential $137.5 million termination fee. The bank might not be able to find another buyer “willing to offer equivalent or more attractive consideration” than what KeyCorp agreed to pay, it said.

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