Raymond James Financial Inc. completed the acquisition of Morgan Keegan & Co. Inc. today. The final price tag on the deal is $1.18 billion. The initial offer was $930 million. The acquirer also agreed to a stipulation where Morgan Keegan would pay its former parent, Regions Financial Corp., a $250 million
dividend. Regions and
Raymond James agreed to delay the special
dividend, however, until the closing of the merger. Morgan Keegan now will make a $250 million payment to
Raymond James, which in turn will pay Regions.
The merged firms have about 6,500 financial advisers managing more than $370 billion in assets.
“The combined firm will provide our financial advisers and capital markets professionals with the benefits of scale and best practices to better support their clients and help us realize our vision of being the premier alternative to Wall Street,”
Raymond James chief executive Paul Reilly said in a statement.
Despite the poor record for mergers in the brokerage industry, this deal has been reasonably well-received by the market. Although the price of
Raymond James stock dropped 5% after the deal was announced Jan. 11, the stock has risen along with the shares of much of the rest of the brokerage sector. The stock is up 7% since the merger was announced and 14% for the year. That compares to a return of about 24% on the NYSE Arca Securities Broker-Dealer Index.
Early indications are that the integration of the two firms is going smoothly. The top 12 executives at Morgan Keegan — including 6 in the private client group — have joined
Raymond James. According to Dennis Zank, chief operating officer at
Raymond James and head of the firm's integration efforts, 98% of the advisers who were offered a retention package have indicated they plan to stay with the merged company. MK advisers needed to have annual production of at least $300,000 to be offered the package.
The response to the deal by the more than 1,000 Morgan Keegan advisers was a concern of some RJ watchers. Indeed, Standard & Poor's Rating Service analyst Nic Khakee put
Raymond James on a negative Creditwatch when the merger was announced. He has since removed the negative outlook.
“Mergers fail not because of financial matters but because of major cultural differences between firms,” said Mr. Zank, who has been with
Raymond James for 34 years. “This is not about wringing every nickel of savings out of the combined operations. We want continuity with our management and with our traders and advisers.”
Mr. Zank credits Morgan Keegan managers with keeping the vast majority of their advisers in the fold. “I take my hat off to the Morgan Keegan management team,” he said. “The reason we're seeing such a high level of retention of advisers is because they feel comfortable with
Raymond James and with the fact that their own management team is remaining intact.”
