Bank of Nova Scotia Plans to Acquire a 14.9% Stake in KeyCorp

No-moat-rated KeyCorp announced that it plans to receive a 14.9% equity stake investment from Bank of Nova Scotia at $17.17 per share, an 11% premium to KeyCorp's 20-day weighted average price. The transaction price also represents a 10% discount to our $19 fair value estimate for KeyCorp. The deal is valued around $2.8 billion, about 20% of Key’s $13.8 billion market cap at last Friday's closing price. The transaction will be completed in two stages, with Bank of Nova Scotia acquiring 4.9% of KeyCorp in 2024 and the remainder in 2025, pending regulatory approval. As part of the deal, Bank of Nova Scotia will be able to select two board members once the second part of the transaction is completed. We don't anticipate a material change to our $19 fair value estimate as a result of the announcement and continue to view shares as undervalued.