is expanding further into New York by acquiring
Union State Bank
parent USB Holdings for $575 million in cash and stock.
News of the deal sent shares of Union State surging 53% on Friday.
Cleveland-based Key has agreed to pay shareholders of the Orangeburg, N.Y., bank about $24.95 a share -- 0.455 shares of Key's common stock and $8.925 in cash.
The price is a 63% premium to Union State's closing share price on Thursday.
The deal will give Key 31 branches in the Westchester, Rockland and Orange counties of suburban New York, as well as Fairfield, Conn. Key already has 32 branches in the Hudson Valley.
Union State has $3 billion in assets, $1.6 billion in loans and $2 billion in deposits.
"This is an important strategic acquisition that will significantly enhance our presence in attractive markets within and contiguous to our current operations," said Beth Mooney, the head of Key's community banking. "We believe our specialties in small business, middle-market banking, private banking and wealth management will be an excellent fit in these markets."
The deal is expected to be completed late in the fourth quarter or early in the first quarter of 2008.
Key was advised by Sullivan & Cromwell, while Union State was advised by Keefe, Bruyette & Woods.
Shares of U.S.B. rose $8.11 to $23.40. Key's stock dropped 16 cents to $35.05.