KeyBank 2007 Annual Report Download - page 76

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
Acquisitions and divestitures completed by Key during the past three
years or pending at December 31, 2007, are summarized below. In the
case of each acquisition, the terms of the transaction were not material.
ACQUISITIONS
Tuition Management Systems, Inc.
On October 1, 2007, Key acquired Tuition Management Systems, Inc.,
one of the nation’s largest providers of outsourced tuition planning,
billing, counseling and payment services. Headquartered in Warwick,
Rhode Island, Tuition Management Systems serves more than 700
colleges, universities, elementary and secondary educational institutions.
Austin Capital Management, Ltd.
On April 1, 2006, Key acquired Austin Capital Management, Ltd., an
investment firm headquartered in Austin, Texas with approximately $900
million in assets under management at the date of acquisition. Austin
specializes in selecting and managing hedge fund investments for its
principally institutional customer base.
ORIX Capital Markets, LLC
On December 8, 2005, Key acquired the commercial mortgage-backed
securities servicing business of ORIX Capital Markets, LLC,
headquartered in Dallas, Texas. ORIX had a servicing portfolio of
approximately $27 billion at the date of acquisition.
Malone Mortgage Company
On July 1, 2005, Key acquired Malone Mortgage Company, a mortgage
company headquartered in Dallas, Texas that serviced approximately
$1.3 billion in loans at the date of acquisition.
ACQUISITION PENDING AT DECEMBER 31, 2007
U.S.B. Holding Co., Inc.
On January 1, 2008, Key acquired U.S.B. Holding Co., Inc., the holding
company for Union State Bank, a 31-branch state-chartered commercial
bank headquartered in Orangeburg, New York. U.S.B. Holding Co. had
assets of $2.8 billion and deposits of $1.8 billion at the date of
acquisition. Under the terms of the agreement, 9,895,000 KeyCorp
common shares, with a value of $348 million, and $194 million in cash
were exchanged for all of the outstanding shares of U.S.B. Holding Co.
The acquisition expands Key’s presence in markets both within and
contiguous to its current operations in the Hudson Valley.
DIVESTITURES
Champion Mortgage
On February 28, 2007, Key sold the Champion Mortgage loan
origination platform to an affiliate of Fortress Investment Group LLC,
a global alternative investment and asset management firm, for cash
proceeds of $.5 million.
On November 29, 2006, Key sold the subprime mortgage loan portfolio
held by the Champion Mortgage finance business to a wholly owned
subsidiary of HSBC Finance Corporation for cash proceeds of $2.5
billion. The loan portfolio totaled $2.5 billion at the date of sale.
Key has applied discontinued operations accounting to the Champion
Mortgage finance business for all periods presented in this report. The
results of this discontinued business are presented on one line as “(loss)
income from discontinued operations, net of taxes” in the Consolidated
Statements of Income on page 62. The components of (loss) income from
discontinued operations are as follows:
3. ACQUISITIONS AND DIVESTITURES
Year ended December 31,
in millions 2007 2006 2005
(Loss) income, net of taxes of ($4), $13 and $23 $ (7) $ 22 $39
Write-off of goodwill —(170) —
(Loss) gain on disposal, net of taxes of ($1) and $8 (2) 14 —
Disposal transaction costs, net of taxes of ($8) and ($5)
a
(13) (9) —
(Loss) income from discontinued operations $(22) $(143) $39
a
Includes after-tax charges of $.8 million for 2007, $65 million for 2006 and $63 million for 2005, determined by applying a matched funds transfer pricing methodology to the liabilities assumed
necessary to support Champion’s operations.