Opinion ID: 2301005
Heading Depth: 1
Heading Rank: 2

Heading: The Sale To BB & T

Text: Only BB & T met Bancorp's demand for a 10% deposit premium. On September 30, 2011, BB & T submitted an indication of interest on that basis. JX 155. On November 1, 2011, BB & T and Bancorp entered into a definitive stock purchase agreement (the Stock Purchase Agreement or SPA). Bancorp and BB & T never explored any other structures that might have involved assuming the Debt Securities. Pursuant to the Stock Purchase Agreement, BB & T will acquire all of BankAtlantic's stock (the Sale Transaction). At closing, during the mystical singularity of the effective time, BankAtlantic will first transfer assets with a book value of $623.6 million to Retained Assets LLC, then distribute the membership interests in Retained Assets LLC to Bancorp. At that point, Bancorp will transfer the stock of BankAtlantic to BB & T. See SPA § 2.3; see also Tr. 173, 460-461. As the defendants concede, [t]he ownership of Retained Assets LLC cannot be divested by BankAtlantic nor owned directly by [Bancorp] until regulatory approval of the Sale Transaction is obtained. Bancorp's Post-Trial Br. (BPTB) 1 n. 2. Regulators only will approve the transfer of the Retained Assets from BankAtlantic to Bancorp because BB & T has agreed to recapitalize BankAtlantic to fill the resulting capital hole. See SPA § 5.10. Through the Sale Transaction, BB & T will gain sole ownership of an entity with approximately $3.4 billion of liabilities and approximately $3.1 billion of assets. The liabilities consist almost entirely of deposits. The assets include approximately $2.1 billion in performing loans, BankAtlantic's network of 78 branches, and Bancorp's 180,000 square foot corporate headquarters building. Post-closing, Bancorp will rent up to 20,000 square feet of office space in its former headquarters from BB & T. Through BankAtlantic, BB & T will own 400,000 customer deposit relationships and all rights to BankAtlantic intellectual property, including the slogan Florida's Most Convenient Bank. Almost 950 of BankAtlantic's 1,000 full time employees will join BB & T or be severed. Confirming that Bancorp will not be continuing in the traditional banking business, Levan and several other Bancorp executive officers will enter into three-year non-competition agreements prohibiting them from engaging in bank depository activities. BB & T will not pay Bancorp any cash for BankAtlantic. Rather, the consideration will take the form of the Retained Assets. These consist largely of criticized assets, meaning those assets that BankAtlantic has categorized as having enhanced credit risk based on regulatory guidelines. The Retained Assets include all of BankAtlantic's loans graded Special Mention, defined by Bancorp as loans that have potential weaknesses [which] may result in deterioration of the repayment prospects for the asset and deserve management's close attention, but do not expose the bank to sufficient risk to warrant adverse classification. JX 136 at 10. The Retained Assets also include BankAtlantic's classified assets, such as all of BankAtlantic's loans and tax certificates that were either non-performing or performing but graded as substandard. According to Bancorp, substandard loans are inadequately protected, have weaknesses that jeopardize the liquidation of the debt, and are characterized by the distinct possibility that the bank will sustain loss if the deficiencies are not corrected. Id. at 9. The Retained Assets also include all other BankAtlantic-owned real estate, i.e., foreclosed properties. Retained Assets LLC will have liabilities of $16.7 million and assets with a net book value of $623.6 million. As of September 30, 2011, the Retained Assets consisted of approximately $271.3 million of performing loans, $315.2 million of non-performing loans, of which $96.5 million were paying as agreed, $18.7 million in tax certificates, $83.4 million of real estate owned, and reserves related to these assets totaling $81.9 million. JX 205 at Ex. 99.1 at 1. Bancorp expects to earn about $14 million a year on interest from the Retained Assets. Tr. 62; JX 178. By contrast, BankAtlantic generated $110 million in interest income during the first nine months of 2011. Toalson projects annual post-transaction expenses for Bancorp, including interest on the Debt Securities, of nearly $30 million per year.