BB&T Corp. (BBT) commenced a $750 million common stock offering for sale to the general public. Underwriters have a 30-day option to purchase up to an additional 15% of common stock from the company to cover over-allotments, if any.
Proceeds from the sale will qualify as tangible common equity and Tier 1 regulatory capital. BB&T intends to use the proceeds for general corporate purposes.
The offering follows BB&T’s acquisition of Colonial BancGroup Inc. BB&T acquired $22 billion in assets and assumed $20 billion in deposits in the transaction. The Federal Deposit Insurance Corporation (FDIC) and BB&T also signed a loss-sharing contract covering substantially all acquired loans and securities of Colonial.
The Colonial deal is the biggest acquisition in BB&T’s history, creating the nation’s eighth-largest financial holding company by deposits. BB&T is a dominant player in Southeastern U.S., the seat of several bank failures. BB&T benefitted by taking over most of these failed banks.
Credit Suisse Securities and Deutsche Bank Securities will act as joint book running managers for the offering, which will be co-managed by BB&T Capital Markets.
The latest offering comes as a safety measure for the bank, and also underscores its ability to raise capital even in these tough times. It will also bolster the bank’s tangible common equity ratio post the Colonial acquisition which was dilutive to BB&T’s capital.
In May, BB&T raised $1.5 billion in a common stock offering. In June, the bank used the proceeds of this offering and other funds to repay $3.1 billion to the U.S. government to exit the Troubled Asset Relief Program.
We believe, however, that these positives are already reflected in the current valuation, leaving limited room for above-market gains. Therefore, we continue to maintain our Neutral recommendation on BB&T shares.
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