updated 5/9/2004 7:48:24 PM ET 2004-05-09T23:48:24

SunTrust Banks Inc. said Sunday it was buying Memphis-based National Commerce Financial Corp. in a nearly $7 billion cash-and-stock deal, the latest merger in the wave of consolidation sweeping the financial sector.

The companies said the combination, which followed a reported bidding war between Atlanta-based SunTrust and Cincinnati-based Fifth Third Bancorp., would create the seventh-largest U.S bank, with $148 billion in assets and $97 billion in deposits.

Under the terms of the $6.98 billion deal announced Sunday, NCF shareholders would receive $8.625 plus 0.3713 SunTrust share for each NCF share. Based on SunTrust’s closing price Friday, the transaction is valued at $33.46 per NFC share — a 5.2 percent premium above NCF’s closing price on Friday. NCF shares surged 13 percent to $31.80 Friday on speculation a deal was imminent.

The pricetag includes $1.8 billion in cash with the balance in stock — approximately 77.5 million SunTrust shares.

“National Commerce, with its great franchise, talented people and high standards, is a superb fit for SunTrust,” SunTrust chairman and chief executive L. Phillip Humann said. “Our companies complement each other perfectly in terms of customer focus, geographic coverage and business orientation.”

A conference call with investors and analysts was scheduled for Monday morning.

The merger follows a string of combinations in the national and regional banking business. Bank of America Corp. recently completed its $47 billion acquisition of FleetBoston Financial Corp., and the proposed $58 billion merger of J.P. Morgan Chase & Co. and Bank One Corp. is pending. In January, Regions Financial Corp. and Union Planters Corp. agreed to merge in a $6 billion deal that creates a Southeastern banking powerhouse. The same month, Huntington Bancshares Inc. announced plans to acquire Unizan Financial Corp. in a stock deal the two companies valued at $587 million.

Analysts had previously said NCF stood to benefit from a combination with either SunTrust or Fifth Third, since each offered access to customers in different regions. Published reports last week had speculated Fifth Third and SunTrust were offering at least $6 billion. At the time, SunTrust and Fifth Third both declined to comment. Messages left Sunday seeking comment from Fifth Third were not immediately returned.

In a news release, the companies did not offer specifics about any job cuts. But the banks said that it anticipated “no branch-based job eliminations” and that a “substantial majority” of other job cuts would occur through attrition. The new organization will have 1,723 full-service offices in 11 states plus the District of Columbia.

NCF is the holding company for National Bank of Commerce, Central Carolina Bank & Trust and NBC Bank. It operates in Tennessee, North and South Carolina, Mississippi, Arkansas, Georgia, Virginia and West Virginia.

National Bank of Commerce has had branches in Wal-Mart stores since 1991. In a two-year test program begun last fall, some branches in Georgia and Tennessee have been operating under the name Wal-Mart Money Centers.

SunTrust operates in Florida, Georgia, Maryland, Tennessee, Virginia and the District of Columbia.

The deal, which is subject to regulatory approval, is expected to close by the end of the year. Later this week, customers will be able to use ATMs of either bank without a usage fee.

“From a cultural perspective, SunTrust operates a similar banking model of regional banks, with local decision-making that keeps the bankers in tune with and responsive to customers’ needs,” NCF president and chief executive officer William R. Reed Jr. said. “Customers will have access to a deeper and broader array of products and services in a larger geographic footprint.”

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