VOL. 126 | NO. 144 | Tuesday, July 26, 2011
Morgan Keegan Bid Deadline Arrives
By Andy Meek
Monday, July 25, was reportedly a deadline for Regions Financial Corp. to get initial bids for the Memphis-based investment bank Regions put on the auction block in June.
Monday reportedly was a deadline for Regions Financial Corp. to get initial bids for Morgan Keegan & Co. Inc., above.
(Photo: Brandon Dill)
Potential bidders expected to make offers before the deadline for Morgan Keegan & Co. Inc. included Blackstone Group LP, Carlyle Group and Stifel Financial Corp., according to a weekend story from the Reuters news service.
Private equity firms also are reportedly interested in the Memphis firm, which one source told Reuters has a book value of about $1.5 billion.
A Regions spokesman told The Daily News the company would have no comment on the bid process.
During a second quarter conference call with analysts last week, BB&T Corp. CEO Kelly King was asked whether his firm might be interested in Morgan Keegan, although not by name.
“The (broker-dealer) you’re probably referring to, we suspect probably won’t end up with a bank,” King said, adding that his firm is satisfied with the broker-dealer arrangement it already has.
Monday’s deadline meant Regions would get initial bids for Morgan Keegan the day before the Birmingham, Ala.-based financial services company reports second quarter results on Tuesday, July 26.
It’s expected Regions will reach a decision on Morgan Keegan quickly, or at least that it has the intention of deciding quickly. If the process drags out and employee departures multiply, that could negatively impact Morgan Keegan’s value.
Morgan Keegan generated $1.32 billion of gross revenue in 2010, according to Reuters.
A few rough analyst estimates put a minimum of at least $700 million on the price Morgan Keegan could fetch. An analyst note from JPMorgan Chase & Co.’s North America Equity Research Department also said Regions is exploring all options for the franchise, including a joint venture if a sale price is not attractive enough.
The JPMorgan Chase analyst note said Morgan Keegan has an implied valuation of more than $700 million.
Regions paid “total consideration” of $812 million for Morgan Keegan about a decade ago, according to Christopher Marinac, managing principal and director of research, FIG Partners LLC. That amount reflected $789 million in gross purchase price, plus another $23 million in a retention bonus pool.
“We argue that this business commands a value of $750 million to $800 million,” Marinac wrote about Morgan Keegan in a note published Thursday, June 23.
Marinac also said Regions may be hoping for a sale price north of $1 billion. That’s because a sale would generate cash that could help reduce the amount of capital Regions has to raise for regulators to allow it to repay its $3.5 billion in Troubled Asset Relief Program funds.
Regions in June announced it had tapped Goldman Sachs & Co. to explore different options for Morgan Keegan. That surprise announcement came the same day as word of a roughly $200 million settlement between Morgan Keegan and multiple regulators, including the U.S. Securities and Exchange Commission, in a civil fraud case.
Founded in 1969, Morgan Keegan grew into one of the top regional investment firms in the nation and has long been a corporate icon in Memphis, with its headquarters tower serving as a prominent fixture on the Downtown skyline.
The Downtown Memphis Commission posted a note on its Facebook page Monday noting that Morgan Keegan employs about 900 Downtown workers and for decades “has been a major investor in the success of Downtown Memphis.”