Is South Financial Group the next target for BB&T Corp.?

Some shareholders of Columbia, S.C.-based South Financial apparently think so.

Over the last two weeks, South Financial’s stock has been unusually active, trading at three times its average volume and at one point cracking the $19 barrier for the first time since late 1999. The surge has been spurred by rumors that $63.7 billion-asset BB&T has its sights set on South Financial, South Carolina’s largest banking company, with $5.2 billion of assets.

On May 30, The State, a Columbia newspaper, published a story that suggested the two companies were in merger talks. Since then the online message boards for both companies have been flooded with merger chatter, with some projecting that a union would be announced last Friday. That was the heaviest trading day in two weeks for South Financial, when its stock hit $19.

South Financial’s stock retreated a bit Thursday, dropping 3.2%, to $17.43.

Neither Winston-Salem, N.C.-based BB&T nor South Financial would comment on the rumored acquisition or on any other speculation about the two companies.

However, Chris Kelley, an analyst with Morgan Keegan & Co. in Memphis, said that South Financial fits BB&T’s acquisition profile: a southern bank with less than $10 billion of assets. It is no secret that BB&T, which has made five purchases in the past year and has two others pending, is hungry for more. These two factors probably produced the rumors, Mr. Kelly said.

Jefferson Harrolson, an analyst with Atlanta-based Robinson Humphrey & Co., said that it would make sense for BB&T to be interested in South Financial because it is a “high-growth franchise,” with the No. 1 market share in Myrtle Beach, S.C., as well as an entry into the Florida market.

“South Financial has a small Florida presence, and getting into Florida is a longtime goal of BB&T’s,” Mr. Harrolson added.

But John Moore, an analyst with Wachovia Securities in Charlotte, N.C., said that the timing would be “unusual” for BB&T because it is in the middle of other transactions.

Mr. Moore and other analysts also pointed out that several other companies have been mentioned as BB&T targets. Though speculation about South Financial has grabbed the most attention in the past month, two Alabama-based banking companies, AmSouth Bancorp. in Birmingham and Colonial BancGroup Inc. in Montgomery, have also been mentioned as potential partners.

In addition, BB&T has confirmed reports that it had made a run at its hometown neighbor, Wachovia Corp., before that company agreed to be purchased by First Union Corp.

BB&T’s stock “seems to be the currency everyone wants to swap for,” Mr. Kelley said. “They’ve been the most active of late, and I guess that’s why their name keeps cropping up."

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