Morgan Keegan Deal Would Represent New Chapter

By Andy Meek

If indeed a deal is close at hand for Regions Financial Corp. to sell its Memphis-based investment banking unit to either Raymond James Financial Inc. or Stifel Financial Corp., it would represent a major new chapter in the firm’s 43 years of history in the city.

The future of Memphis-based investment firm Morgan Keegan & Co. Inc. remains in doubt.
(Photo: Brandon Dill/The Memphis Daily News)

When it was founded in 1969, Morgan Keegan & Co. Inc. had just five employees and half a million dollars in capital. In the decades since then, Morgan Keegan – the headquarters tower of which bears its name and occupies an iconic spot on the Downtown Memphis skyline – has grown its roster to include more than 3,100 employees. And as of Dec. 31, the firm has $890 million in equity capital.

Yet a sale of the firm – which could lead to any number of outcomes, depending on the intent of the winning bidder – might be at hand.

Such is the nature of the now six-month auction process, which has seen multiple interested parties, including private equity bidders and competing investment firms, step into the picture to look at buying the company. And many of the interested buyers have reportedly had different inclinations about what to do with the firm, which went public in 1983.

Over the weekend, The Wall Street Journal reported that a deal to sell Morgan Keegan to either Raymond James or Stifel could be announced as early as this week.

Stifel reportedly had a temporary period of exclusivity in the negotiations recently, but that has expired, according to multiple sources. More than one source also told The Daily News that representatives of Raymond James were in town within the last several days, but the company did not respond to phone calls seeking details.

Morgan Keegan has been a subsidiary of Regions, the Birmingham, Ala.-based financial services company, since 2001. Regions paid $812 million to buy Morgan Keegan, which reflects a gross purchase price of $789 million plus another $23 million in a retention bonus pool.

At this point, the minimum amount Regions is expected to walk away with in a sale is not much more than it paid to buy Morgan Keegan 11 years ago. The Wall Street Journal reported the expected sale price is between $900 million to $1 billion and that both Raymond James and Stifel have financing commitments in place.

At an industry conference in New York City in December, Regions president and CEO Grayson Hall said Regions will conclude a transaction to sell Morgan Keegan only if it benefits Regions in terms of capital, liquidity and risk profile.

He also said market conditions in recent months “have been challenging, which has added complexity to this overall process.”

A look at the firm’s history, meanwhile, shows Morgan Keegan grew fast – and early – in Memphis.

The firm secured a seat on the New York Stock Exchange in 1970. It created an investment banking division six years later, and in 1985, revenue topped $50 million for the first time.

The firm acquired smaller boutique shops and competitors around the country over the years, and in 1986 Morgan Keegan moved into asset management. By 1993, revenue topped $200 million, and by 1997, total assets surpassed $1 billion for the first time.

Morgan Keegan ranked as one of the largest lead underwriters of municipal securities in the U.S. in the first half of 2011, and seven of its equity research analysts were chosen as being among the best in the nation in two surveys conducted by the Financial Times and The Wall Street Journal.

In 2005, the firm extended its lease at Morgan Keegan Tower to keep the firm Downtown through 2015. A few years later came the credit crisis and Great Recession, then a high-profile blowup of a portion of the firm’s mutual fund business, followed by Regions facing big losses of its own – and the ultimate decision to put Morgan Keegan on the auction block.