Keycorp, U.S. Bancorp Explored Merger
NEW YORK - Two large banks - KeyCorp of Albany, N.Y., and U.S. Bancorp of Portland - held merger talks last year but were unable to come to terms on a deal, American Banker has learned.
The talks began in August and ended in October with a meeting between Victor Riley Jr., KeyCorp's chief executive, and Roger Breezley, his counterpart at U.S. Bancorp. The two executives met secretly at the Hilton Hotel near Chicago's O'Hare airport.
Riley confirmed the discussions in a telephone interview. He said he ended the talks after concluding the deal would not benefit his stockholders.
Breezley, who apparently initiated the discussions, declined to comment.
Additional details were gleaned from sources close to the negotiations.
KeyCorp, which had about $23 billion in assets at the time, and U.S. Bancorp, Oregon's biggest banking company, with $19 billion in assets, are not expected to resume merger discussions.
Indeed, Riley said he now is interested only in buying banks with less than $15 billion in assets.
Earlier this year KeyCorp, parent of Key Bank, agreed to acquire Tacoma-based Puget Sound Bancorp, with $5 billion in assets, as well as $1.5 billion in deposits to be divested by BankAmerica Corp. in Washington.
Acquiring U.S. Bancorp, which is the third-largest bank in Washington, would pose serious antitrust problems, analysts said.
In his 18 years at the helm, Riley has eschewed large deals. Still, he has managed to transform KeyCorp from a sleepy upstate New York banking company into a super-regional bank with operations in eight states.
Many of KeyCorp's subsidiaries are small community banks in remote places such as Vinalhaven, Maine, or Hoonah, Alaska.
But a megamerger of KeyCorp and U.S. Bancorp would have solved some major problems for both companies, said a source involved with the potential deal.
At the time, KeyCorp was looking to expand its market share in the Pacific Northwest. U.S. Bancorp, meanwhile, was looking to expand outside the region, where it believed its growth opportunities were limited.
Equally important, the source said, the deal would have given Riley a solution to who would succeed him.
Riley, 60, and his No. 2 officer, William Dougherty, 61, are expected to retire in the next few years. Last summer, there were no heirs apparent. An orderly transition of power to Breezley, 54, and his No. 2, Edmund Jensen, 54, would have solved that problem.
In fact, the merger talks progressed far enough that participants assumed that the headquarters of the merged companies would be in Portland.
Since then, Riley has hired James Waterston, 51, former vice chairman at Comerica Inc., to be group executive vice president and a possible heir.
Had the deal been struck, it would have created a powerhouse banking company with a sizable presence on both the Northwest and Northeast coasts.
The resulting institution would have had about $42 billion in assets, making it the nation's 16th-largest bank holding company.