SunTrust Banks Inc. agreed Monday to acquire Crestar Financial Corp. for $8.6 billion in stock, expanding into the fast-growing Virginia-Washington marketplace.
SunTrust said it will pay 0.96 of a share, valued at $76.02, for each share of Crestar, a 19 percent premium based on Friday’s close.
The premium caused SunTrust shares Monday to plunge $8.44 to $79, its biggest drop since before the October 1987 stock market crash. Crestar, meanwhile, surged $9.31, to $73.31.
The combination of Atlanta-based SunTrust, which helped take Coca-Cola Co. public in 1919 and guards the secret formula for the soft drink in its vaults, and Crestar, based in Richmond, Va., will create the 10th-largest U.S. bank, with $88 billion of assets and 1,093 branches in six states and the District of Columbia.
Crestar shares had surged in the last month because it was considered a takeover candidate. SunTrust is paying 24.7 times Crestar’s estimated 1999 earnings, and 4.27 times its book, or net asset, value.
SunTrust shares fell because “there’s a fair premium, and that’s the problem right there,” said Charles Vincent, co-director of equity research at PNC Bank Corp., which held 123,696 shares of SunTrust at the end of March.
Still, “Virginia is a great market,” Vincent said. The area that Crestar serves has the fourth-largest population in the nation, and Crestar is the biggest bank based in Virginia.
