The Federal Deposit Insurance Corp is taking Colonial BancGroup Inc into receivership and will sell the struggling lender's branches and deposits to BB&T Corp , Dow Jones said, citing a person familiar with the situation.

The deal was approved by the FDIC on Thursday night and is expected to be announced later on Friday, the news agency reported.

Colonial officials could not immediately be reached for comment. The FDIC said it does not comment on open and operating institutions. A BB&T spokesman declined to comment.

Colonial, based in Montgomery, Alabama, operates 355 branches in Florida, Alabama, Georgia, Nevada and Texas and has over $25 billion in assets.

Its failure would be the largest bank failure since Wachovia collapsed last September.

Earlier this week, the Alabama State Banking Department had said it might appoint the FDIC as receiver or conservator for its banking unit after August 12.

On Wednesday, however, Alabama banking regulators canceled a scheduled meeting with Colonial to discuss the bank's fate, without giving a reason.

Colonial has been battered by the credit crisis and faces a U.S. Justice Department criminal probe into alleged accounting irregularities at its mortgage lending unit.

Colonial shares were halted on the New York Stock Exchange. BB&T shares were up 8 percent at $27.88 at midday.

(Reporting by Anurag Kotoky and Sweta Singh in Bangalore; Editing by Anil D'Silva)