KeyCorp, which earlier this year agreed to acquire the parent company of Idaho Bank and Trust for $58 million in cash, has changed the terms of its offer.
KeyCorp, based in Albany, N.Y., and owner of Key Bank of Utah, now is offering IB&T Corp. stockholders a combination of stock and cash worth an estimated $55 million, IB&T Chief Executive Ted E. Ellis said Monday.The terms of the new offer call for IB&T shareholders to receive 55 percent of their payment in KeyCorp stock. The balance would be in cash.
However, KeyCorp has reserved the right to pay entirely in cash at least 15 days before the transaction closes.
Ellis said the value of the deal was trimmed largely because the per-share price of KeyCorp's stock has declined since negotiations began last year.
When the sale is completed, IB&T shareholders will receive about $22.871/2 per share. A stockholder who owns 1,000 shares would be paid cash and securities worth $22,875. Of that, the shareholder would receive about $10,300 in cash. The rest would be in securities.
"I view it as a definite advantage" for shareholders, Ellis said. "We expect the stock transaction to be a tax-free exchange."
Under Internal Revenue Service rules, many stock swaps are not subject to tax.
When the two companies opened talks about a merger, the initial proposal was for a totally tax-free stock swap patterned after KeyCorp's acquisition in December of Commercial Security Bank, formerly IB&T's sister bank in Salt Lake City, Ellis said.
The offer was amended to straight cash after the stock market crash of Oct. 19 because KeyCorp's stock price had declined. The company would have had to issue more of its stock to IB&T shareholders to make up the difference, thus diluting the ownership of the other outstanding shares.
Ellis said the advantage to KeyCorp is that in order to pay for the acquisition, it does not have to raise so much cash. By issuing stock, it is making an investment in its own net worth.
Both companies are preparing an application to the Securities and Exchange Commission, which must approve the stock swap. The application should be submitted within 10 days.
IB&T stockholders will vote on the merger proposal in mid-June. The merger is expected to close in late September.