BB&T Inks Another Deal, Buying Bank of Kentucky for $363M

Within a week of inking a deal to acquire 41 banking branches in Texas, BB&T Corporation (BBT) announced another transaction to buy the Crestview Hills, Kentucky-based Bank of Kentucky Financial Corporation (BKYF). The cash/stock deal is valued at approximately $363 million.

Bank of Kentucky, with $1.9 billion in assets and $1.6 billion in deposits, has 32 banking branches. This acquisition will enable BB&T to foray into the Northern Kentucky/Cincinnati market, making it the second largest bank in Kentucky. Further, the deal accompanies the creation of a new banking region by BB&T – Greater Cincinnati – that would cover Northern Kentucky and Cincinnati.

Under the terms of the deal, shareholders of Bank of Kentucky will receive 1.0126 shares of BB&T and $9.40 in cash for each share of the former. Hence, based on BB&T’s 14-day average closing price of $37.13 on Sep 4, 2014, the total consideration is worth $47.00 per share of Bank of Kentucky.

However, the deal though approved by the board of directors of both the companies, still awaits approval from the shareholders of Bank of Kentucky. Regulatory approvals are also pending.

BB&T expects the deal to be accretive to its earnings in the first full year of completion. Further, Robert Zapp, President and Chief Executive Officer of Bank of Kentucky, will become the chairman of BB&T's local advisory board once the deal is closed.

Moreover, Bank of Kentucky’s regional president Andrew Hawking, along with Retail and Small Business Banking manager Mark Exterkamp, will lead BB&T’s new local market. BB&T intends to expand further in the lucrative Cincinnati region by adding more banking locations.

At a time when many large regional players including SunTrust Banks, Inc. (STI), Fifth Third Bancorp and KeyCorp. (KEY) are shying away from full-bank acquisitions owing to increasing regulatory scrutiny, BB&T remains an active acquirer. In 2012, the company acquired BankAtlantic, a wholly owned subsidiary of BankAtlantic Bancorp Inc.

Also, BB&T’s foray into Texas region comes with addition of banking branches. The acquisition of 21 branches from Citigroup Inc. in Jun 2014, was followed by an announcement of adding another 41 branches, made earlier this month

We believe that with its strong capital and liquidity positions, BB&T will continue to grow through acquisitions going forward. This, in turn, will aid the company’s top-line growth, which is presently under pressure owing to a low interest rate environment and lower loan demand.

Currently, BB&T carries a Zacks Rank #3 (Hold).

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