ATLANTA AND WINSTON-SALEM, N.C. — In a blockbuster deal, SunTrust Banks Inc. (NYSE: STI) and BB&T Corp. (NYSE: BBT) have entered into an all-stock merger agreement valued at approximately $66 billion. The marriage of these two iconic financial institutions in the Southeast will create the sixth-largest bank in the United States. Under terms of the agreement, SunTrust investors will receive 1.295 shares of BB&T for each SunTrust share they own. That equates to BB&T agreeing to pay $28.1 billion for SunTrust’s equity as of the closing price on Wednesday, Feb. 6.
The combined company will operate under a new name and brand and be headquartered in Charlotte, N.C., while maintaining significant operations and investment in Winston-Salem, N.C., and Atlanta. The entity’s headquarters in Charlotte will also feature an innovation and technology center to aid with the transference of digital information.
The deal, which is still subject to shareholder approval and other customary regulatory approvals, is expected to close in the fourth quarter of this year. A press release highlighting the agreement says the name of the new entity will be announced prior to the transaction closing.
The agreement is being billed by both companies as a “merger of equals.” Shareholders of North Carolina-based BB&T will own approximately 57 percent of the new company, while SunTrust shareholders will retain 43 percent ownership.
The ranking as sixth-largest U.S. bank is based on the new company’s anticipated volume of assets ($442 billion) and deposits ($324 billion), compared with $301 billion in liabilities.
BB&T chairman and CEO Kelly S. King will serve as CEO of the combined company and its subsidiaries until Sept. 12, 2021. William H. Rogers Jr., chairman and CEO of SunTrust, will serve as president and COO of the new company until Sept. 12, 2021, at which point he will become CEO of the new entity and its various subsidiaries.
Company executives cite overlap between the banks’ business models and target markets — plus the potential to achieve annual cost savings as great as $1.6 billion by 2022 — as the key drivers behind the merger. The heightened scale of the new company will drive greater investment in transformative technology and allow for a more satisfying client experience, according to company officials.
According to The Wall Street Journal, the deal is likely to lead to branch closures throughout the Southeast. BB&T and SunTrust, which have more than 3,100 branches all told and about 740 within two miles of each other, both have been shuttering locations as customers migrate to digital offerings, the newspaper reports.
In addition, executives touted BB&T’s community banking and insurance operations as complementary to SunTrust’s middle-market corporate and investment banking businesses, and thus a good opportunity to generate additional revenues.
BB&T expects its earnings per share to increase by 13 to 17 percent by 2021 as a result of the deal. SunTrust projects that its earnings per share will rise by 9 to 16 percent by 2021.
“This deal combines the best of both companies to create the premier financial institution of the future,” says King. “It’s an extraordinarily attractive financial proposition that provides the scale needed to compete and win in the rapidly evolving world of financial services.”
RBC Capital Markets served as financial advisor and Wachtell, Lipton, Rosen & Katz served as legal counsel to BB&T in this transaction. Goldman Sachs and SunTrust Robinson Humphrey served as financial advisors and Sullivan & Cromwell served as legal counsel to SunTrust in this transaction.
The stock price of SunTrust opened at $65.69 per share on Thursday, Feb. 7, down from $67.98 per share a year ago. BB&T’s stock price opened at $51.01 per share, down from $53.44 per share at this time last year.
— Taylor Williams