BRADENTON, Fla. — St. Petersburg-based Raymond James Financial announced Tuesday that it has cleared a significant procedural hurdle in its acquisition of Morgan Keegan & Co.
The firm said it has been granted early termination of a federal pre-merger review under the U.S. Department of Justice’s Hart-Scott-Rodino Antitrust Improvements Act, satisfying one of the conditions for the purchase of Memphis-based Morgan Keegan from Regions Financial Corp.
On Jan. 11, Raymond James entered into a definitive stock purchase agreement to acquire Morgan Keegan and MK Holding Inc. for $930 million. As part of the transaction, Morgan Keegan will pay Regions a dividend of $250 million before closing.
Last week, Raymond James chief executive officer Paul Reilly said the integration of Morgan Keegan is on track, and that the firm had successfully completed the sale of 11 million of common shares as part of the acquisition financing.
“We remain excited about the long-term strategic benefits and potential increase in earnings power this combination will bring,” Reilly said.
Despite recent rulings by the Financial Industry Regulatory Authority against Morgan Keegan, Raymond James Financial anticipates closing on the sale by April 2.
In a ruling earlier this month, Morgan Keegan was ordered to pay Birmingham, Ala., investor William Featheringill $1.95 million, the amount that he invested in Jefferson County’s auction-rate sewer securities.
A FINRA arbitration panel said Morgan Keegan misrepresented that the auction-rate securities were safe, liquid and tax-free investments. The ARS are in default, and the sewer debt is a major reason Jefferson County filed for bankruptcy in early November.
Regions announced plans to divest Morgan Keegan in June 2011, after the brokerage unit agreed to a $200 million settlement with federal, state and industry securities regulators to settle fraud charges against Morgan Keegan related to subprime mortgage-backed securities.
Other cases resolved by FINRA recently involved funds operated by Morgan Keegan, and investments by at least one former employee.
The firm reportedly was considering appeals in some of the cases.
Raymond James’ purchase of Morgan Keegan sets the stage for growth in municipal bond business as the regional firms combine.
Morgan Keegan was ranked ninth among municipal underwriters in 2011, pricing 488 deals worth $9.25 billion and holding a market share of 3.2%, according to Thomson Reuters.
Raymond James, which views itself as an “alternative to Wall Street,” ranked as the 15th-highest muni underwriter last year with 208 deals worth $3.39 billion, or a 1.2% market share.
In late January, Raymond James offered retention packages to eligible Morgan Keegan advisors whose 12-month gross production is at least $300,000. The industry standard is $500,000.