Raymond James Acquires Morgan Keegan for $930 Million

By Frank Yu
Frank Yu
Frank Yu
January 14, 2012 Updated: January 14, 2012

Raymond James Financial Inc. has reached an agreement with Regions Financial Corp. to purchase Morgan Keegan, Regions’ brokerage subsidiary, for around $930 million in stock.

After a drawn-out auction period, the deal is expected to close in the first quarter of 2012. It is the biggest financial services merger to date this year.

The Birmingham, Ala.-based Regions will get total windfall of around $1.18 billion after the deal closes, which is the sum of $930 million paid by Raymond James and a $250 million dividend it would receive from Morgan Keegan directly.

The Memphis, Tenn.-based Morgan Keegan is a mid-market investment bank and brokerage firm and one of the nation’s biggest underwriters of municipal bonds. It has extensive operations in the South and Midwest regions of the United States.

“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,” said Raymond James CEO Paul Reilly in a statement.

Morgan Keegan’s current CEO, John Carson, will join Raymond James and head its fixed income and public finance business, to be headquartered in Memphis.

The acquisition will propel Raymond James into the upper echelon of brokerage firms. Currently it has around 6,000 financial advisers, but it will add more than 1,000 from Morgan Keegan once the deal is done.

The deal “represents a major step toward achieving our vision of being the premier alternative to Wall Street,” Reilly said.

Regions had been preparing to sell Morgan Keegan since last June, looking to raise cash in order to pay back a $3.5 billion TARP bailout loan it had received from the U.S. federal government during the 2008 financial crisis.

Stifel Nicolaus of St. Louis made an effort to purchase Morgan Keegan on Jan. 8, for around $875 million in cash and shares, but the offer fell short of Raymond James’ final bid. According to reports, various private equity firms were also interested in making a bid but did not succeed.

Raymond James is based in St. Petersburg, Fla. The deal is pending regulatory approval.

Frank Yu