ALBANY, N.Y. - KeyCorp and Society Corp. of Cleveland said they plan to merge in a stock swap valued at $7.8 billion, forming the nation's 10th-largest banking company with almost 1,400 offices nationwide.
The new company will be named KeyCorp or some form of that name.
The name of KeyCorp's local subsidiary, Key Bank of Washington, will not change. With 193 branches and $6.5 billion in assets, Key Bank is this state's second-largest commercial bank. It will be the third-largest bank in the new KeyCorp/Society company, behind banks in Cleveland and New York.
Debora Bevier, a KeyCorp executive from Albany, was recently named chief executive of Key Bank of Washington, replacing Hans Harjo who resigned suddenly after guiding Key Bank through its $800 million merger with Puget Sound Bancorp last year.
Under the Keycorp-Society transaction, KeyCorp shareholders will receive 1.205 shares of the new company for each KeyCorp share. KeyCorp also declared a dividend of one right on each outstanding share of KeyCorp stock to be paid Nov. 1 to holders of record Oct. 15.
Society Corp. shareholders will retain their existing shares.
The combined company will have about 244 million shares outstanding.
The transaction will create a $58 billion-asset financial concern headquartered in Cleveland with operations stretching from the Pacific Northwest to New England.
"Creating a dynamic banking company from the strong organizations that KeyCorp and Society have built over the years should enable us to make major strides forward in efficiently providing enhanced and innovative banking services to our customers," said Victor Riley, chairman of KeyCorp.
KeyCorp is the nation's 25th-largest banking company with assets of $32 billion on June 30. It has more than 650 offices in eight states and major operations in New York, Maine, Alaska, Washington and Oregon.
Society Corp., the nation's 29th-largest banking company, has $25.9 billion in assets and more than 300 offices in Ohio, Indiana and Michigan.
"Strategically, this is a well-designed acquisition," said James McDermott Jr., president of Keefe Bruyette & Woods, a research firm that tracks the banking industry. "It addresses the issue of revenue generation and should serve as a template for other acquisitions."
Society Corp. has a sizable trust operation, which includes asset and investment management services, while KeyCorp is strong in mortgage banking. Combining the two would give the resulting company a steady stream of income from both loans and fees.
"Society is well developed in products like trust and middle-market lending, while Key is a good consumer and business bank. There won't be the same kind of reduction in expenses, but it speaks to the issue of geographic and product diversification," said McDermott.
The merged company expects to take a $90 million to $110 million charge in the fourth quarter in connection with the merger, representing the estimated costs of consolidating the two banking organizations. The companies said they expect to save $80 million to $105 million annually through consolidation of some operations.
Riley, KeyCorp's 62-year-old chairman, will be the new company's chairman and chief executive.
Robert Gillespie, Society Corp.'s 49-year-old chairman, will become president and chief operating officer until Dec. 31, 1995, when he will succeed Riley as chief executive. Riley will continue as chairman through 1998.
The two companies plan to schedule separate shareholder meetings for the end of 1993 to vote on the transaction.