Raymond James to Sell 10.5M Shares to Pay for Morgan Keegan Deal

Nearly $323 million from the proceeds of the common stock sale will be used for the $930 million acquisition of Morgan Keegan

(From left) RJ's Dennis Zank, COO, and Chet Helck, CEO Global Private Client Group. Morgan Keegan's Dick Ferguson, President Private Client Group, and RJ's Tash Elwyn, President Private Client Group. (From left) RJ's Dennis Zank, COO, and Chet Helck, CEO Global Private Client Group. Morgan Keegan's Dick Ferguson, President Private Client Group, and RJ's Tash Elwyn, President Private Client Group.

Raymond James Financial (RJF) said late Monday that it would sell 10.5 million shares of common stock to help it fund its $930 million purchase of Morgan Keegan from Regions (RF), which it expects to close in April. As part of the sale, about 1 million shares will be sold by siblings of Executive Chairman Tom James.

In addition to proceeds from the stock sale–which at Tuesday’s stock price ($34) would raise about $323 million–Raymond James will pay for Morgan Keegan with cash and the proceeds from an expected public offering of some $600 million of senior debt securities. Tuesday’s announced stock sale is being managed by JPMorgan Chase.

The St. Petersburg, Fla.-based financial company also says it has access to a $900 million loan bridge facility that is available to finance a portion of the Morgan Keegan acquisition and related fees, such as the retention package it is offering advisors with $300,000 and up in yearly fees and commissions. Raymond James has about 5,400 advisors and Morgan Keegan about 1,000.

In October, Regions reportedly offered potential suitors some $200 million in financing to get private-equity and other investors interested in the purchase. Raymond James said it would buy Morgan Keegan in mid-January after the private-equity firms failed to pursue the acquisition.

“I have mixed views on the surface,” said Chip Roame, head of Tiburon Strategic Advisors in an interview with AdvisorOne. Raymond James appears to have access to some debt financing, for instance, says the consultant. “And interest rates are low, so assumedly a firm would take advantage of such non-equity money, if it was available and appropriate,” he notes.

Still, the company's stock is doing well, Roame (left) shares. Its 12-month trading range is about $23 to $40, and it’s trading above $34 at midday Tuesday. “That says if you are going to sell equity, now is a good time,” he noted.

As of Dec. 31, 2011, the company had cash of about $1.9 billion, total liabilities of around $15 billion and total equity of some $3 billion, its prospectus states. According to Reuters’ data, Raymond James debt-to-equity level is roughly 33 vs. 228 for the S&P 500.

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