* Stifel, Raymond James among rivals eyeing unit
* Blackstone, Carlyle, TPG, Apollo, Warburg interested
* Initial bids for Morgan Keegan due Monday
* Morgan Keegan has book value of about $1.5 bln
(Adds analyst comment, Regions declining to comment)
By Paritosh Bansal and Megan Davies
NEW YORK, July 22 Blackstone Group LP (BX.N),
Carlyle Group and Stifel Financial Corp (SF.N) are among the
firms expected to submit initial bids on Monday for Morgan
Keegan, the brokerage unit of Regions Financial Corp (RF.N),
sources familiar with the situation said.
Morgan Keegan has a book value of about $1.5 billion, one
Other potential bidders for the unit include private equity
firms TPG Capital LP [TPG.UL], Apollo Global Management LLC
(APO.N) and Warburg Pincus LLC [WP.UL], the sources said.
Other buyers besides Stifel among broker-dealers include
Raymond James Financial Inc (RJF.N), one source said.
Regions, a bank based in Birmingham, Alabama that has not
yet repaid the $3.5 billion bailout money received from the
Troubled Asset Relief Program, hired Goldman Sachs Group Inc
(GS.N) in June to explore strategic options for Morgan Keegan.
Regions said at that time it agreed to pay $210 million to
state and federal regulators to settle allegations Morgan
Keegan fraudulently marketed mutual funds. [ID:nN1E75L158]
Regions, TPG, Blackstone, Apollo and Raymond James declined
to comment. The rest of the potential bidders were not
available for comment.
Regions is hoping to move quickly on the auction. A
prolonged sales process can lead to uncertainty among employees
and cause departures, eroding the value of the franchise.
Morgan Keegan has about 1,200 brokers in its private client
group and also has investment banking and capital markets
Regions is open to having an arrangement with the buyer of
the unit where it could continue to sell retail banking
products, such as certificates of deposit, through the
brokerage network, the source said.
But that is not a precondition to a deal, the source
Still, Regions might not want to sell the business to
"If you sell to a bank or another firm interested in bank
business, you're effectively inviting competition into your
backyard," said Jefferson Harralson, a bank analyst at Keefe,
Bruyette & Woods.
Earlier this week, BB&T Corp (BBT.N) Chief Executive Kelly
King said he was under the impression that the Memphis,
Tennessee-based brokerage would be sold to a non-bank buyer.
Kelly, who was speaking on a conference call for analysts,
said the Winston-Salem, North Carolina-based bank had no
interest in buying a large broker-dealer.
One option for the business could be a management-led
buyout backed by private equity investors, the sources said.
"Management would like it because it gives them their
independence back. This was a successful, independent company
for a long time before it was bought," Harralson said.
Regions bought Morgan Keegan in 2001 for $789 million.
For private equity firms, Morgan Keegan could be an
attractive purchase and an easy exit down the road. The unit
posted a 24 percent increase in net income in the first
Morgan Keegan generated $1.32 billion of gross revenue in
2010. Morgan Asset Management and Regions Morgan Keegan Trust
are not part of the business being sold.
"It's attractive because it has some market share and is
successful," Harralson said, adding that a private equity shop
could sell it eventually to a bank or in an public float.
"I could see how the private equity acts as a bridge from
one bank owning this to another a few years down the line," he
The bid deadline for Morgan Keegan is a day before Regions
reports its second quarter results on Tuesday. Regions has not
posted an annual profit since 2007.
Regions shares closed down 0.5 percent at $6.20 on the New
York Stock Exchange. Stifel was up 1.3 percent at $40.37, while
Raymond James rose 0.4 percent to $34.12. Blackstone closed up
3.7 percent at $17.63 and Apollo was up 1.4 percent at $16.94.
(Reporting by Paritosh Bansal and Megan Davies; additional
reporting by Joe Rauch; editing by Gerald E. McCormick, Matthew
Lewis and Andre Grenon)