(Bloomberg News) Raymond James Financial Inc. on Wednesday announced a deal to buy Regions Financial Corp.'s Morgan Keegan brokerage unit for about $930 million in a stock purchase agreement. The deal is expected to boost Raymond James' private wealth management and capital markets businesses.
"While our preference is generally organic growth, we have used strategic mergers to grow throughout our history when the timing and pricing are right and, most importantly, when there is a strong cultural fit and clear path for integration," Raymond James CEO Paul C. Reilly said in a statement.
Morgan Keegan Chief Executive Officer John Carson will become president of Raymond James Financial and will oversee its fixed Income and public finance businesses. Other senior leaders from Morgan Keegan will join the company in yet-to-be determined roles.
Adding Morgan Keegan would bring the St. Petersburg, Florida-based brokerage one of the top underwriters of U.S. municipal bonds and would expand its retail brokerage network, placing it among the nation's biggest firms. Raymond James has about 5,100 financial advisers compared with 1,200 at Morgan Keegan.
"A merger like this would be very positive for Raymond James," said Mark Williams, a lecturer at Boston University's School of Management. "They can't grow organically in this market."
Regions plans to collect a $250 million dividend from Morgan Keegan before the sale, boosting the amount of cash proceeds to about $1.2 billion, the person with knowledge of the talks said.
Regions said in June it hired Goldman Sachs Group Inc. to seek a buyer for Memphis, Tennessee-based Morgan Keegan. The bank is seeking to bolster capital and eventually repay a $3.5 billion U.S. bailout, the largest still outstanding for any institution under the Treasury's bank-rescue program.
Regions previously discussed a sale of the brokerage with Stifel Financial Corp. and with private-equity investors, according to people with knowledge of the matter. Stifel, after being excluded from the talks in December, returned to the bargaining table last week, the people said.
Stifel submitted its latest offer, of about $875 million in cash and stock, on Jan. 8, two people said.
Founded with five workers in 1969, Morgan Keegan has more than 300 offices across the Southeast and Midwest, including Texas, Missouri, Ohio, the Carolinas and Florida. It has more than 3,100 full-time employees