Robbins LLP: Acquisition of First Niagara Financial Group (FNFG) by KeyCorp (KEY) May Not Be in Shareholders’ Best Interests
Robbins LLP is investigating the proposed acquisition of First Niagara Financial Group (NASDAQ: FNFG) by KeyCorp (NYSE: KEY). On October 30, 2015, the two companies announced the signing of a definitive merger agreement pursuant to which KeyCorp will acquire First Niagara. Under the terms of the agreement, First Niagara shareholders will receive $2.30 in cash and 0.68 shares of KeyCorp for each share of First Niagara they own, the value of which is equivalent to $11.40 per share of First Niagara.
Is the Proposed Acquisition Best for First Niagara and Its Shareholders?
Robbins LLP’s investigation focuses on whether the board of directors at First Niagara is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $11.40 merger consideration represents a premium of only 25.5% based on First Niagara’s one-month average closing price prior to rumors of the deal surfacing in the media on September 22, 2015. This premium is below the average one-month premium of nearly 34% for comparable transactions within the past five years. Further, the $11.40 merger consideration is below the target price of $12.00 set by analysts at Compass Point Research & Trading on October 1, 2015, and Jefferies on October 6, 2015; and $11.50 set by an analyst at American Capital Partners on October 23, 2015.
On October 23, 2015, First Niagara reported earnings results for its third quarter 2015. Total loans for the quarter were $23.4 million, an increase of 4.3% compared to the same period last year. Total noninterest income for the quarter was $83.4 million, an increase of 10.6% compared to the same period last year. Additionally, First Niagara has beat consensus analyst estimates for adjusted EPS and adjusted net income in every quarter for the past year. In commenting on these results, First Niagara President and Chief Executive Officer Gary M. Crosby remarked, “In the third quarter of 2015, our business fundamentals were strong, as evidenced by a 10% annualized increase in average transactional deposits and 10% increase in commercial business loans. We also continued to make great progress in implementing our strategic investments, which remain on-time, on-budget and are focused on delivering enhanced products and services, based on customer preferences. As we roll-out these enhancements, I also am very pleased with the customer experience that our team is delivering and the positive brand recognition that it is creating for First Niagara across the markets we serve. In a recent J.D. Power Survey, 92% of our branch customers said that they would be ‘likely advocates’ of First Niagara as a banking partner to their friends and family – a number that puts us among top financial institutions with best-in-class customer experience.”
In light of these facts, Robbins LLP is examining First Niagara’s board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
First Niagara shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
First Niagara shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003,or you can complete the form below and we will contact you directly.