Published: Thu, February 07, 2019
Finance | By Loren Pratt

BB&T will buy SunTrust in deal worth $66 billion

BB&T will buy SunTrust in deal worth $66 billion

A BB&T bank is pictured in Alexandria, Virginia July 22, 2010.

The banks hope to close the deal later this year.

The U.S. economy sizzled a year ago.

Both of the banks are calling it a "merger of equals".

Bank of America CEO Brian Moynihan said at the World Economic Forum in Davos, Switzerland last month that it would take a round of United States bank mergers to produce a new rival to his firm.

BB&T, based in Winston-Salem, and SunTrust, based in Atlanta, announced what they called the "merger of equals" Thursday.

More pertinent is a plan by the Federal Reserve to create different ways of regulating banks with less than $700 billion in assets, seen by some as an indication that the Fed will loosen its scrutiny of regional banks.

The combined company will operate under a new name and have around $442 billion in assets, $301 billion in loans and $324 billion in deposits, and will rival Citigroup and Bank of America.

Its footprint will cover the U.S. East Coast, with new corporate headquarters in Charlotte, North Carolina.

The merger joins two banks that have grown along with the bustling Southeast and Mid-Atlantic regions where they began. Hostile takeovers are rare in the banking world. It could prompt bank managements to more actively consider deals. he said. Each reported strong fourth-quarter earnings last month and there were no signs of pressure near to mid-term, said Terry McEvoy, managing director at Stephens. They said that when they combine, they'll have top-three market share in eight states.

BB&T chairman and CEO Kelly will keep those titles with the merged bank.

Shares of SunTrust jumped 11.1 percent in early morning trading, while BB&T's stock rose 5 percent. The value of mergers and acquisitions in the USA financial-services sector more than doubled to US$196.5 billion in 2018 from US$82.3 billion in 2017, EY said. SunTrust shareholders will receive a 5% increase in their dividend upon consummation of the transaction based upon each Company's current dividend per share.

BB&T and SunTrust have about 740 branches within two miles of each other, or about 24 percent of all branch locations run by the banks. BB&T controls about 4.2 percent of the area's deposits, according to the FDC. Most bank mergers stopped after the crisis because the banks had to clean up their balance sheets, and the regulatory environment under the Obama administration made mergers more hard.

Changes in US tax laws have lowered corporate taxes, freeing up capital, and Wall Street has always been expecting a wave of dealmaking in banking.

A Wachtell Lipton memo said the speed of the approvals was evidence of an "increasingly favorable regulatory environment for bank M&A".

BB&T agreed to pay a roughly 7% premium for SunTrust, according to Bloomberg data. William Rogers, SunTrust's CEO, will serve as president and chief operating officer until September 2021, then he will step into the CEO role and later the chairman position. The new company's market value will be about $76 billion.

The blockbuster deal will alter Charlotte's banking landscape, which has lost bank headquarters in recent years through industry combinations.

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