ATLANTA (AP) — Southeastern regional banks BB&T and SunTrust will attempt to join in an all-stock deal, creating a new bank valued at about $66 billion.
The banks said Thursday that the combined company will be the sixth-largest U.S. bank based on assets and deposits. It will have approximately $442 billion in assets, $301 billion in loans and $324 billion in deposits serving more than 10 million households. Its market value is estimated at $76 billion.
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 Chairman and CEO Kelly King said during a conference call that the companies will be "careful and methodical" about which branches they close.
The companies operate banks from Pennsylvania to Florida, and as far west as Texas.
Regional banks can be a bellwether for local economies and the willingness to pursue a deal of this size can be taken as a signal of optimism. The U.S. economy was sizzling in last year. The Commerce Department estimated last month that the economy, as measured by the gross domestic product, grew at a brisk 3.4 percent annual percent rate in the July-September quarter
"It's an extraordinarily attractive financial proposition that provides the scale needed to compete and win in the rapidly evolving world of financial services," King said in a prepared statement.
Investors agreed, sending shares of both banks sharply higher at the opening bell, and industry analysts saw a lot of potential.
"This deal is attractive since you are combining two high performing companies with attractive business mix and geography," wrote Citi analyst Keith Horowitz.
The combined company will be based in Charlotte, North Carolina, its board and management evenly split between BB&T Corp. and SunTrust Banks Inc. A new name will be chosen before the deal closes in the fourth quarter.
The combined company will keep a community banking center in Winston-Salem, North Carolina, where BB&T is based. It will keep a wholesale banking center in Atlanta, where SunTrust has its headquarters. King said during a call with analysts Thursday that the combined business will invest heavily in technology. To that end, an innovation and technology center will be based in Charlotte.
SunTrust shareholders will receive 1.295 shares of BB&T for each share they own. BB&T shareholders will own about 57 percent and SunTrust shareholders will own the rest. SunTrust shareholders will receive a 5 percent increase in their dividend once the deal is complete. The transaction includes a mutual breakup fee of approximately $1.1 billion.
Daryl Bible, chief financial officer of BB&T, said during the call that the amount of divestitures that'll be needed for the transaction to be completed will be minimal. He estimated divestitures at approximately $1 billion.
King will serve as chairman and CEO of the combined business until Sept. 12, 2021. After that, he will serve as executive chairman for six months. He'll serve on the board until the end of 2023. Bill Rogers, chairman and CEO of SunTrust, will serve as president and chief operating officer of the combined company until Sept. 12, 2021. He will then become CEO for six months, then add board chairman to his title.
Shares of SunTrust jumped 11.1 percent in early morning trading, while BB&T’s stock rose 5 percent.