BB&T Corp. has agreed to merge with SunTrust Banks Inc. in a $66 billion deal poised to create the sixth largest U.S. retail bank. If approved, this will become the biggest bank merger since the financial crisis of 2007-2009.
“This is a true merger of equals, combining the best of both companies to create the premier financial institution of the future,” said Kelly King, BB&T’s chairman and CEO. “It’s an extraordinarily attractive financial proposition that provides the scale needed to compete and win in the rapidly evolving world of financial services.”
Mr. King is expected to maintain his roles at the merged company until Sept. 12, 2021. Thereafter he will be the executive chairman until March 12, 2022 and remain on its board of directors until late 2023.
Under the terms of the agreement, shareholders of SunTrust shareholders will receive 1.295 shares of BB&T for each SunTrust share they own. The deal offers a 7% premium to shareholders of SunTrust based on the stock’s closing price on Wednesday. SunTrust shareholders will own approximately 43%, while BB&T shareholders will own approximately 57% of the combined company.
The merger was unanimously approved by the companies’ boards of directors and is expected to close in the fourth quarter of 2019. However, it is still subject to satisfaction of customary closing conditions, including approval by the shareholders of each company and receipt of customary regulatory approvals.
The deal values the merged bank at $66 billion. In a joint statement released by the banks early Thursday, the combined company will have about $442 billion in assets. SunTrust had $215.5 billion in assets at the end of 2018, while BB&T had $225.7 billion.
The merger is expected to save $1.6bn in operating costs per year by 2022 with savings coming from IT systems, retail banking, shared service, third-party vendors, and facilities.
William H. Rogers, Jr., chairman and CEO of SunTrust, said, “By bringing together these two mission- and purpose-driven institutions, we will accelerate our capacity to invest in transformational technologies for our clients. Our shared culture embraces the disruption of technology and we will take this innovative mindset to expand our leadership in the next chapter of these historic brands.”
Mr. Rogers will become the president and COO of the combined company and then take on the roles of chief executive officer when Mr. King’s tenure comes to a close. The new bank is yet to be given a name, but will be based in Charlotte, N.C, home to Bank of America Corp. Shares of BB&T ran up 4.8% following the news, while SunTrust stock traded 8.5% higher.