Updated Thursday at 3:20 p.m.
Southeastern regional banks BB&T and SunTrust plan to merge in a $66 billion deal that will create the nation's sixth-largest bank, to be headquartered in Charlotte and with a new name.
That new name hasn't been chosen yet, but was among the issues the two CEOs said they left up to discussion as they talked about a potential deal in the past few weeks.
"Everything went in the middle of the table, headquarters, the name … all those things that people get caught up in," SunTrust CEO Bill Rogers told analysts on a conference call.
BB&T, based in Winston-Salem, and SunTrust, based in Atlanta, announced what they called the "merger of equals" Thursday. The combined company will have about $442 billion in assets, $301 billion in loans and $324 billion in deposits, serving more than 10 million households in 17 states and the District of Columbia. The new company's market value will be about $76 billion.
BB&T chairman and CEO Kelly will keep those titles with the merged bank. Rogers will be president and chief operating officer. In 2021, Rogers will take over as CEO. The merger still needs approval from regulators and shareholders. It's expected to be completed as early as September or October.
The companies said they expect to save $1.6 billion a year in expenses by 2022, which independent bank analyst Nancy Bush said is likely to mean layoffs.
"A lot of those cost saves will come in jobs," Bush said. "So that's a negative for some communities."
BB&T and SunTrust have yet to come up with detailed merger plans, and the number and kinds of job cuts aren't known. They say they'll eliminate overlapping administrative and technology services, and get rid of unneeded facilities. A major source of savings will come from closing bank branches. About a quarter of their combined branches — 740 of them — are within two miles of one another.
King told analysts the companies would be "careful and methodical" about which branches they close.
During Thursday morning's conference call, the companies also talked about the need to invest in technology. They pledged to spend an extra $100 million year on technology and innovation.
King borrowed a word from the tech world - disruption - to describe the merger.
"We talked about the fact that in order to survive in this really quickly changing world, it's important to be willing to change. We talked about disrupt to thrive, and this is it - this is kind of the ultimate disrupt to thrive," King said.
The deal certainly will be disruptive to the way the companies separately have done business. Both have survived decades of bank merger mania by acquiring smaller banks and expanding beyond their home states. They've now decided that a big merger is better than that go-it-alone strategy.
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.
