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BB&T on Acquisition Spree

BBT

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Yesterday, BB&T Insurance Services, a subsidiary of BB&T Corporation (BBT - Analyst Report) has announced the expansion of its operation in California. The company is acquiring Precept Group, an employee benefits consulting and administrative solutions firm.

With this acquisition, BB&T will expand its footprints in attractive California market and increase headcount by 140 in its Insurance Services division. Though the terms and value of the deal remained undisclosed, the agreement closed on November 1.

Precept, founded in 1987, serves organizations with 50 to 50,000 employees in 42 states, as well as multinational companies and governmental agencies. The firm offers employee benefits consulting, health management, administration outsourcing, procurement as well as retirement and online enrollment services.

BB&T stated Precept would operate under the same name. Furthermore, the firm will continue to administer Precept Consulting Services and ProView Benefits Administration Services as before. BB&T will be able to improve its customer relationship and also expand its market share by improvising on consulting and administrative services for the existing clients while opening door for the new clients.

Mr. Wade Olson, the CEO of Precept, stated Precept will provide innovative benefit solutions, which would facilitate the clients to take competitive advantage. According to BB&T, Precept's industry innovations have resulted in unique program offerings. At current level, the employers are facing higher costs and need to fulfill requirements under the Patient Protection and Affordable Care Act.

Therefore, they need highly consultative services, which include the most cost-effective plan offerings to convene the needs of their employees with the alleviation of catastrophic risk.

In September, BB&T Insurance Services also announced the acquisition of Atlantic Risk Management Corporation of Columbia. With this acquisition, BB&T will expand its footprints in attractive metro Baltimore area and have a broader representation in Washington, D.C., area as well. The terms and value of the deal were not disclosed.

Further, BB&T Insurance Services also announced the acquisition of San Jose, California-based Liberty Benefit Insurance Services. Liberty, a full-service employee benefit broker, would operate as BB&T-Liberty Benefit Insurance Services.

Earlier this week, BB&T announced the signing of an agreement to acquire Florida-based BankAtlantic, a wholly-owned subsidiary of BankAtlantic Bancorp Inc. . The transaction would allow the company to fast track its expansion strategy in Florida region.

Though BFC Financial Corporation , the major shareholder of BankAtlantic Bancorp’s Class A common stock, supports this deal, the agreement still is subject to regulatory approvals and customary closing conditions. Furthermore, both the companies have not specified the time of the closure of the transaction.

Upon the closure, the deal will be accretive to BB&T’s earnings per share in 2012 excluding one-time acquisition expenses. This would add 78 branches to BB&T’s 64 branch network in Florida region. However, the agreement excludes BankAtlantic Bancorp's nonperforming and other criticized assets identified as of September 30.

Besides, substantially increasing BB&T’s market share and footprints, these acquisitions would also improve the company’s top line over the medium term.

Our Viewpoint

BB&T relies extensively on acquisitions to expand its revenue streams. Following the systems conversion of Colonial in the first half of 2010, the company is retaining capital to grab acquisition opportunities. Though BB&T mainly focuses on organic growth strategy, the company has never been averse to expand its market share through acquisitions. Going forward, management expects to maintain this balanced growth structure.

BB&T currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are also maintaining our long-term Neutral recommendation on the shares.

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