BB&T to buy SunTrust: It’s the biggest bank merger in a decade

BB&T to buy SunTrust: It’s the biggest bank merger in a decade

The banks said Thursday that the combined company will be the sixth-largest USA bank based on assets and deposits.

Super regional banks, with typically have between $50 billion and $500 billion in assets, have been grappling with how to grow with fewer resources than the four largest US banks like JPMorgan Chase & Co and Bank of America Corp. They said they'll now have top-three market share in eight states. The companies operate banks from Pennsylvania to Florida, and as far west as Texas. Both have survived decades of bank merger mania by acquiring smaller banks and expanding beyond their home states. Wells Fargo merged with Wachovia, JPMorgan acquired Bear Stearns and Washington Mutual and Bank of America purchased Merrill Lynch.

The value of mergers and acquisitions in the USA financial-services sector more than doubled to $196.5 billion in 2018 from $82.3 billion in 2017, according to Ernst & Young.

BB&T Corp will buy SunTrust Banks Inc for about $28 billion in an all-stock deal, the regional lenders said on Thursday, creating the sixth largest USA lender in the biggest bank deal since the 2007-2009 financial crisis.

The U.S. economy sizzled a year ago.

"The regulatory environment is much easier for something of this size to happen", said Brian Klock, an analyst with KBW.

Data provider Dealogic values the deal based on the exchange of shares at $28bn, which makes it the Canadian bank's largest M&A advisory mandate in which it has acted as sole adviser.

SunTrust shareholders will receive nearly 1.3 shares of BB&T for each SunTrust share they own. BB&T shareholders will own about 57 percent of the combined company and SunTrust shareholders will own the rest - creating roughly a merger of equals.

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The combined company will be based in Charlotte, North Carolina, its board and management evenly split between BB&T Corp. and SunTrust Banks Inc. The combined company will keep a presence in Winston-Salem, North Carolina, where BB&T is based.

Shares of SunTrust finished up 10.2 percent at $64.72, while BB&T gained 4.0 percent to $50.46.

Bank of America is the market leader with $21.3 billion in deposits and a almost 30 percent market share. About one-quarter of the BB&T and SunTrust branches, 740 of them, are within two miles of each other. BB&T Chairman and CEO Kelly King said during a conference call that the companies will be "careful and methodical" about which branches they close. The banks said that they expect the merger will cut their costs by at least $1.6 billion by 2022.

Kelly S. King, chairman and chief executive officer of BB&T, will serve as CEO of the combined company through September 12, 2021.

Shares of Atlanta-based SunTrust jumped 8.3 percent to $63.62, above the acquisition price, while BB&T rose 2.4 percent to $49.71.

"We have been expecting a step up in the pace of banking industry consolidation with the belief that the increasing importance of scale and branding coupled with regulatory support (i.e., the $700bn tailoring line) would drive bigger bank deals", Credit Suisse's Susan Katzke said in a note to clients.

The Baltimore Sun staff contributed to this report.

Manufacturers and Traders Trust Co.

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