BB&T-SunTrust deal came together with remarkable speed

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It’s amazing how quickly the merger agreement between BB&T and SunTrust Banks came together.

While the two had been rumored merger partners for more than a decade, it took the companies less than six months to negotiate the $28 billion transaction announced in February, according to a regulatory filing tied to the pending deal.

Kelly King, BB&T’s chairman and CEO, and Bill Rogers, his counterpart at SunTrust, appear to have held exclusive talks. Moreover, there was little haggling over price, and BB&T spent less than a week conducting due diligence.

Large deals such as the BB&T-SunTrust merger require buy-in from both parties, especially the official seller, that are often hard to achieve.

BB&T had long coveted SunTrust. John A. Allison, King’s predecessor, acknowledged in a recent interview that he had made overtures to the Atlanta regional over the years, only to be rebuffed.

Why the change of heart at SunTrust?

The filing gives three reasons: technology, bank and nonbank competition and the potential benefits of scale. Those factors persuaded SunTrust’s management and board during three planning sessions last spring to finally become receptive to a large merger.

On Aug. 10 King and Rogers discussed industry challenges and their banks’ common interests. No detail was provided on how the conversation came together.

At a November meeting, SunTrust’s board authorized Rogers to “assess whether a strategic business combination … would be viable,” the filing said. That set the stage for a Dec. 21 meeting between King and Rogers where the CEOs agreed that an even split of directors and executive leadership from each organization would be necessary to foster the right culture.

While the meeting covered branding, leadership and the headquarters location, it did not involve discussion of any specific financial terms. King and Rogers participated in several phone calls in early January that finally looked at the factors and data that could determine pricing.

The companies, and their advisers, came up with a price relatively quickly, establishing a range on Jan. 10 and agreeing to the final exchange ratio just 11 days later. A nondisclosure agreement was signed on Jan. 26, paving the way for the companies to conduct due diligence.

BB&T took little time to assess SunTrust. Due diligence began on Feb. 1; BB&T indicated three days later that the assessment “was going well and was expected to be completed soon,” the filing said.

With the terms settled, King attended a SunTrust board meeting on Feb. 5 to tout the deal. Rogers attended a BB&T board meeting the next day. The board approved the merger on Feb. 6, and it was announced the next morning.

The deal would create a $442 billion-asset juggernaut along the East Coast. BB&T would own 57% of the combined company, which would be rebranded and based in Charlotte, N.C.

The merger, which is expected to close in the fourth quarter, will create a company with $301 billion in loans and $324 billion in deposits.

The 22-director board and 14-member management committee will be evenly split between BB&T and SunTrust.

It is unclear which regulator will ultimately oversee the new BB&T. The filing notes that SunTrust’s bank will merge into Branch Banking & Trust, which is state-regulated.

The filing did not address BB&T’s new name. While BB&T’s shareholders will vote on the new name, the meeting date and the proposed name were redacted in the filing.

This article originally appeared in American Banker.
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