The Bank of Nova Scotia (BNS) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of a 14.9% equity interest in KeyCorp aligns with the strategy to increase capital deployment in key developed markets, especially the U.S., strengthening the North American corridor vision and presence across Canada, U.S., and Mexico.

• KeyCorp was selected for its strong commercial franchise, cultural fit, and complementary business lines, supporting cross-border capabilities and Scotiabank's Global Banking and Markets business.

• The investment is an early step to build scale, leverage cross-border capabilities, and enhance competitive advantage in North America.

• The deal provides near-term returns and longer-term optionality for further collaboration and strategic moves in the U.S. market.

• Intention to explore future mutually beneficial strategic opportunities with KeyCorp.

Financial terms and conditions

• Scotiabank will acquire a 14.9% stake in KeyCorp for approximately US$2.8 billion (CAD 3.9 billion) at US$17.17 per share, representing an 11% premium to the 20-day VWAP, executed in two stages.

• The first stage (4.9% ownership) is expected to close in Q4 fiscal 2024; the second stage (up to 14.9%) in fiscal 2025, with board representation rights upon exceeding 10%.

• The investment is expected to contribute CAD 300–350 million in annual earnings and add about CAD 0.25 to EPS in 2026, with EPS accretion in the first full year after completion.

• CET1 ratio impact is estimated at 10 basis points for the initial investment and a further 40–45 basis points for the additional investment, keeping the bank within its target range.

• Initial investment designated as FVOCI; full investment to be recorded using equity method after completion.

Integration plans and timeline

• Initial 4.9% investment expected to close in Q4 fiscal 2024 after HSR waiting period; additional 10% to close in fiscal 2025 upon Federal Reserve approval.

• Upon completion, Scotiabank will designate two directors to KeyCorp's board.

• Investment will be recorded as equity at fair value initially, then as an investment in associate after full completion.