BB&T Completes Crump Buy

On Monday, BB&T Corporation ( BBT - Analyst Report ) announced the accomplishment of the purchase of Crump Group Inc.’s insurance business. BB&T, in particular, acquired the life and property and casualty insurance operating units of Crump. It, however, excluded Ascensus, the retirement services business of Crump.

BB&T shelled out $570 million in cash to complete the purchase. The acquisition is projected to be accretive to the company’s earnings. It is anticipated to enhance BB&T’s Insurance annual revenue by approximately $300 million. As a result of the deal closure, BB&T becomes the largest independent wholesale distributor of life insurance in the country.

The acquisition is a strategic fit as it would help BB&T in increasing its market share in life insurance distribution and P&C businesses. Moreover, we believe that the company’s top line will also get a boost as it was otherwise bogged down by several financial reform rules.

Our Take

BB&T has extensively depended on acquisitions to broaden its top line and market share. The company announced four acquisitions in 2011. With these acquisitions, the company has been able to extend its footprints in the California, Florida, Washington D.C. and Baltimore. These deals have also significantly added to BB&T’s branch network.

Moreover, after its deal to acquire BankAtlantic, a wholly owned subsidiary of BankAtlantic Bancorp Inc. ( BBX ) was opposed in the court, BB&T modified certain terms of the agreement. Apart from the earlier deal terms, BB&T will also assume BankAtlantic Bancorp’s obligations related to the outstanding trust preferred securities (TruPS) that have a balance of about $285 million.

For BB&T, the BankAtlantic transaction will enable it to boost its expansion strategy in the Florida region. Moreover, the deal will add 78 branches to the company’s 64-branch network in the Florida region. Besides, the substantial increase in BB&T’s market share and footprints following the acquisition would also improve its revenue stream over the medium term.

Therefore, even though the current tepid economic recovery coupled with regulatory issues remain an overhang on the stock, we believe BB&T’s growth strategies with focus on both organic as well as inorganic front will augur well going forward. In addition, its solid liquidity position and steady improvement in capital and profitability ratios would encourage investors to consider the company as a value investment.

BB&T shares maintain a Zacks #2 Rank, which translates into a short-term Buy recommendation. Considering the fundamentals we also have a long-term Outperform recommendation on the stock.