NORTH CAROLINA: US regional lender BB&T Corp will buy rival SunTrust Banks Inc for about US$28 billion in stock, unveiling the biggest bank deal since the 2007-2009 financial crisis and a potential first step in a long-awaited wave of consolidation in the sector.
The combined company will operate under a new name and have around US$442 billion in assets, US$301 billion in loans and US$324 billion in deposits, and will rival US Bancorp that has about US$467 billion in assets.
Its footprint will cover the East Coast, with new corporate headquarters to be situated in Charlotte, North Carolina. The combined company will retain operations in Winston-Salem, North Carolina, and Atlanta, Georgia, the home markets for both companies.
The deal comes as the Trump administration is easing crisis-era regulations, which restricted expansion and added increased regulatory scrutiny on big banks.
Deal activity in the sector languished after the financial crisis a decade ago as stricter rules were imposed on lenders with more than US$50 billion in assets and regulators barred banks with compliance issues from expanding.
Changes in US tax laws have lowered corporate taxes, freeing up capital, and Wall Street has long been expecting a wave of dealmaking in the banking sector.
Bank of America Corp chief executive officer Brian Moynihan earlier this year publicly predicted a new wave of big bank mergers at Davos.
“The BB&T/SunTrust merger will open more eyes on the potential for more sizeable bank M&A to occur,” Jefferies analyst Ken Usdin wrote in a client note.
As part of the deal, SunTrust shareholders will receive 1.295 shares of BB&T for each share they own. The per share deal value of US$62.85 is at a 7% premium to SunTrust’s closing price on Wednesday, according to a Reuters calculation.
Shares of Atlanta-based SunTrust jumped 10% to US$64.60 before the opening bell, above the acquisition price, while those of BB&T rose 5% to US$51.20.
BB&T shareholders will own 57% of the combined company and SunTrust will own the rest.
Analyst Stephen Scouten of brokerage Sandler O’Neill said he expected the deal to get regulatory approval. “These are both very clean banks. So ultimately, (it) should get done.”
The deal, expected to close in the fourth quarter, will likely result in an annual cost savings of around US$1.6 billion by 2022, the companies said, adding that the merger will generate an internal rate of return of about 18%.
Kelly King, BB&T’s chief executive officer, will be the CEO of the combined company until Sept 12, 2021, after which SunTrust CEO William Rogers Jr will take over.
The two companies called it a merger of equals, valued at US$66 billion.