KeyCorp announced today that it has agreed to sell the company's investment management subsidiary Victory Capital Management and its broker dealer affiliate Victory Capital Advisers to a private equity fund sponsored by Crestview Partners for $246 million in cash and debt, subject to adjustment at closing. Key intends to seek regulatory approval to use the gain from the sale to repurchase shares of its common stock.
"For Key, the divestiture is consistent with our strategic focus on businesses that leverage the competitive advantages of our core relationship banking model," said Chairman and CEO Beth E. Mooney . "In addition, this transaction partners Victory with a widely recognized acquirer, allowing Victory to operate as a pure play investment management business, with management owning an equity position."
The sale price consists of $201 million of cash at closing and a seller note. The initial face amount of the note will be $45 million, with its final value determined at the end of 2013. KeyCorp estimates the after-tax gain on the closing of the transaction in the range of $145 to $155 million, subject to final valuation of the note. The business to be sold represented $112 million in revenue and $88 million in expense of KeyCorp's financial results in 2012.
Victory Capital Management has approximately $22 billion of assets under management and offers a wide range of investment strategies and vehicles for institutional and individual clients. Victory Capital Advisors, a registered broker dealer, provides mutual fund distribution services.
Crestview Partners is a value-oriented private equity firm based in New York City, with approximately $4 billion of capital under management.
The sale is expected to close during the third quarter of 2013. It was approved by the Victory Mutual Fund Board of Directors, and is subject to customary closing conditions and consents of the Victory Mutual Fund shareholders and certain investment advisory clients.
Morgan Stanley & Co. LLC acted as exclusive financial advisor and Sullivan & Cromwell LLP provided legal advice to KeyCorp.
Key traces its history back more than 160 years and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key has assets of approximately $89.2 billion on December 31, 2012.
Key provides deposit, lending, cash management and investment services to individuals and small businesses through its 14-state branch network under the name KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name.