Raymond James is in the running to acquire Morgan Keegan, according to published reports. Morgan Keegan, which has about 1,200 advisors, was put on the block by parent Regions Financial Corp. (RF) this summer after the firm agreed to a $210 million settlement with federal, state and industry regulators over issues related to subprime mortgage-backed securities.
Since then, rumors have swirled over who would buy the regional b/d, from private equity firms to Stifel Financial Corp. (SF) and now Raymond James (RJF). According to Reuters, Stifel is not in the running anymore because it lowered its bid to below $1 billion, and Raymond James could be close to a deal this week. The valuation of Morgan Keegan is expected to total around $1.2 billion, Reuters reports.
Of course, at this stage it’s still mostly speculation. Anthea Penrose, spokeswoman for Raymond James, and Evelyn Mitchell, spokeswoman at Regions, declined to comment. Meanwhile, Reuters reported that a Raymond James deal could still fall through, and Stifel’s status has been back and forth. Last week it was rumored to be out; after the weekend, it was thought to be back in the running; today it’s reportedly out again.
One analyst, who asked not to be named, said a Morgan Keegan deal would fit with Raymond James’ recent strategy of growth by acquisition. The retail brokerage business is pretty attractive right now, but it’s hard to grow organically, he said. And the price is relatively reasonable because everyone knows that Regions wants to sell Morgan Keegan to raise capital. Also, pricing levels are not what we’d see in frothier markets, the analyst said.
“An acquisition in the $900 million to $1.1 billion range would be extraordinary for RJF,” wrote Douglas Sipkin and Warren Gardiner, analysts with Ticonderoga Securities Research, in a research note. “Historically, RJF has done small bolt on transactions where details are often not disclosed. This would represent a big change from that history. We like this transaction if RJF can deliver outsized accretion over a twelve to sixteen month period. Organic business momentum has been robust despite market conditions and we do not want to see that disrupted.”
Sipkin and Gardiner believe Raymond James is the better candidate to buy Morgan Keegan than Stifel because the firm can finance the transaction at a lower interest cost, and pay out more in cash than stock.
If a deal were to go through with Raymond James, Morgan Keegan reps would likely be rolled up into Raymond James & Associates, the firm’s traditional employee brokerage.
So who’s spilling the news? And what’s the motive? If you have any information about a possible deal in the works, please reach out to me at [email protected].
Features Editor Kristen French contributed reporting for this story.