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Regions buys Morgan Keegan
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December 18, 2000: 10:17 a.m. ET
Merger, valued at $27 a share, creates major Southeast financial services firm
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NEW YORK (CNNfn) - Regions Financial Corp., a leading Southeast bank holding company, agreed Monday to acquire U.S. securities firm Morgan Keegan Inc. for $789 million in cash and stock, significantly bolstering the company's brokerage and wealth management capabilities.
The transaction will create a dominant financial services institution in the Southeast, offering everything from retail and institutional brokerage services to fixed income and asset management capabilities.
"Together we will create the full range financial services company our customers want and need," said Allen Morgan, Morgan Keegan's chairman and chief executive, and one of the company's original founders. "Combining with Regions will provide us with a unique platform, which comes with being part of a large financial services company."
Terms of the agreement call for the Birmingham, Ala.-based Regions (RGBK: Research, Estimates) to exchange $27 per share in stock for each Morgan Keegan share, although Morgan Keegan shareholders can elect to receive up to 30 percent of their payment in cash.
 That values the Memphis, Tenn.-based securities firm at a 39 percent premium from the company's closing price of $19.44 Friday and is a more than 21 percent premium above the company's 52-week high of $22.25. Morgan Keegan (MOR: Research, Estimates) shares jumped $6.88 to $26.31 in early morning trading Monday.
Regions shares, meanwhile, slipped 38 cents to $24.25 in early trading. The company said based on current estimates, the transaction would be "modestly dilutive" to its 2001 earnings per share, but add to earnings thereafter. The merger is expected to immediately add to Regions' cash earnings per share.
Regions' board also authorized the company to repurchase up to 100 percent of the shares issued as part of this transaction, which is expected to close during the first quarter of next year.
The acquisition is aimed primarily at strengthening Regions' brokerage and asset management capabilities at a time when U.S. banks are rushing to diversify their portfolios.
The 31-year old Morgan Keegan has gradually expanded from a small fixed income and brokerage operation to a multi-state financial services company through the years, offering everything from merger and acquisition advice to acting as an agent for professional sports athletes through its 1995 acquisition of Athletic Resource Management.
As a result of the merger, Regions said approximately 40 percent of its income will now come from non-interest or fee income, as opposed to its roughly 3 percent level now.
Regions has set aside an additional 5.5 million stock options to help retain key Morgan Keegan employees. Morgan will serve as chairman and chief executive of Regions' expanded securities operation. 
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