Regions Financial to Sell Morgan Keegan, Repay TARP Debts

Regions Financial RF agreed to sell Morgan Keegan & Co. to Raymond James Financial RJF for $930 million. Regions will get $1.18 billion in proceeds from the sale, including a dividend of $250 million, if the deal receives regulatory approval. In a press release, Regions Financial CEO Grayson Hall said that the "agreement validates our belief in the value of the Morgan Keegan franchise as a leading brokerage and investment banking firm based in the Southeast. I am very pleased that we were able to reach an agreement that benefits our shareholders and helps us focus on our core banking business while also allowing us to continue providing a full range of products and services seamlessly to our customers." The sale will also move Regions to record an impairment charge, which the company expects to fall int he range of $575 million and $745 million in Q4 2011. The sale is expected to close in the first quarter of 2012, and the company expects a total gain on the sale to reach $20 million. The sale comes after the financial holding company returned to profitability in 2011 after running into the red in 2010. Net profit margins went from negative to a positive of 9.67% in Q3 2011, and analysts are expecting the firm to maintain its bullish performance. Most recently, Bank of America reiterated its buy rating of the company on news of the agreement to sell Morgan Keegan. The deal is also expected to help Regions Financial repay debts still owed in connection to its Troubled Asset Relief Program (TARP) bailout. In September, the bank still owed $3.5 billion, more than any other bank that received funds. Regions is hoping for a fast deal so that it can pay back its debt to the federal government. If the sale is approved, the lower debt load should help Regions' operating margins expand substantially. Founded in 1969, Morgan Keegan is a regional investment bank based in Memphis, Tennessee, where it and its affiliates work with private clients in over 300 offices across the south and midwest. The bank had over 3,100 employees in August 2011 and revenues over $1.3 billion in 2010. Regions Financial first put the Morgan Keegan unit up for sale in June with the hopes of selling it for $1.5 billion. Regions shares were selling for slightly below its closing price in premarket trading, despite Bank of America's Buy rating. However, the stock has been performing well since October, thanks largely to its return to profitability.