Huntington Bancshares Inc. has agreed to sell its 141 branches in Florida to SunTrust Banks Inc. for a deposit premium of $705 million in cash.
The Florida sale is part of a companywide restructuring that Huntington, of Columbus, Ohio, announced in mid-July aimed at slashing costs, freeing up capital, and improving profits. Huntington said it expects a pretax gain of $200 million on the sale.
The deal, which requires regulatory approval, is expected to close in February. It expands Atlanta-based SunTrusts reach in some of the nations fastest-growing metro areas. SunTrust said the purchase would boost its deposit share to No. 1 or No. 2 in five key markets.
SunTrust would pay a 15% premium for $4.7 billion in deposits, and also would get $2.6 billion in loans and 456 ATMs. The franchise also comes with about $860 million in trust assets under management. In an investor presentation this morning, SunTrust executives described the price as favorable in comparison with a slew of similar transactions in recent years.
The deal was SunTrusts first since losing a summer-long battle with First Union Corp. for the right to merge with Wachovia Corp.
From a corporate perspective, this move fits perfectly with our strategic priority of efficiently leveraging SunTrusts existing position in high growth, demographically attractive markets, SunTrust chairman, president and chief executive L. Phillip Humann said in a press release. This particular transaction represents a unique opportunity to achieve meaningful cost reductions without impacting customer service levels or sales momentum.
SunTrust is predicting annual cost savings of $48 million, 65% in the first year, helped in part by branch consolidations and roughly 600 job cuts.
Of the 141 branches SunTrust would acquire, some 35 are in grocery store locations, mostly in Albertsons stores, with a combined $80 million in deposits. SunTrust executives said they will meet soon with Albertsons to discuss whether to keep, sell, or close those offices.
The Atlanta-banking company expects to keep about 65 of the 106 traditional branches, divesting approximately eight, or 5% of the total, to meet antitrust concerns, Mr. Humann said in a conference call. SunTrust will take a one-time charge of about $100 million next year, and said the deal would add to earnings beginning in 2003.
