Regions of Ala. Buying Tenn. Brokerage Firm: Acquirer Looking to Expand beyond Banking
Leibowitz, Alissa, American Banker
In a bid to expand its services for individuals and broaden beyond traditional banking, Regions Financial Corp. of Birmingham, Ala., has agreed to buy the Memphis brokerage Morgan Keegan Inc. for $789 million.
Morgan Keegan would bring Regions capabilities in retail and institutional brokerage, fixed income, asset management, equity capital markets, investment banking, and mergers and acquisitions advisory.
Regions said Monday that the deal would bring an additional client base to which it can cross-sell its banking products. Morgan Keegan has 600 retail brokers and 54 offices in Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Massachusetts, Mississippi, New York, North Carolina, Tennessee, Texas, and Virginia. Combined, the company would have 961 brokers in 14 states.
The deal is expected to close in the first quarter, pending approvals from regulators and Morgan Keegan stockholders.
Several rival southern banking companies have been trying to diversify by acquiring brokerage operations or commercial banks in neighboring states. Wachovia Corp. in Winston-Salem, N.C., bought Interstate/Johnson Lane Inc., with 450 brokers and 63 branch offices, and Amsouth Bancorp of Birmingham bought First American Corp. of Nashville.
Regions, with $43.6 billion of assets, has failed to match profit expectations in recent quarters. It had a five-year plan, called the Regions Asset Management Strategy, for expanding its investment services businesses. This acquisition would accelerate achievement of that goal, executives said.
In a conference call Monday, Regions chief executive officer Carl E. Jones Jr. said the deal is a "natural combination for growth."
Regional brokerages have been struggling to overcome their distribution limitations. Many have sold out to far larger competitors. In June, J.C. Bradford & Co. of Nashville was sold to PaineWebber Group for $620 million.
During the conference call Allen B. Morgan Jr., chairman and CEO of Morgan Keegan, admitted he had been shopping around for a buyer in recent months. He said he was attracted to the deal because Regions' geographic reach is similar to Morgan's. After meeting with a number of other suitors, Mr. Morgan said, he had decided that Regions' "culture was the closest we've seen to ours."
Rosalind Looby, an analyst at Credit Suisse First Boston, questioned the deal's timing. …