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Raymond James Completes $1.2B Deal for Morgan Keegan

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Raymond James Financial (RJF) announced Monday morning that it had closed on the acquisition of Morgan Keegan from Regions Financial, paying $1.2 billion in cash.

In an interview, Raymond James COO Dennis Zank reiterated what was previously reported—that he expected most of Morgan Keegan’s 1,000 advisors to join Raymond James, that 98% of the 600 Morgan Keegan reps presented with retention offers had signed a letter of intent to join the firm—but also said that of those 98%, 96% had already submitted their paperwork to do so.

In addition, Zank said 12 of Morgan Keegan’s top managers had signed employment contracts with Raymond James. Of that number, six were from Morgan Keegan’s private client unit, including its top two executives and its four regional directors.

Raymond James COO Dennis Zank“For the most part,” said Zank (left), those Morgan Keegan advisors “will continue to work with their management teams.” With the anticipated addition of the 1,000 Morgan Keegan FAs to the Raymond James & Associates employee broker-dealer, Raymond James will have about 6,500 representatives across its employee and independent and bank BD channels in the U.S., Canada and the U.K.

(See previous AdvisorOne article on Raymond James-Morgan Keegan retention deal.)

The company statement on the closing said that Morgan Keegan Private Client Group offices will be known as Raymond James | Morgan Keegan. Zank said Raymond James Financial Services, the firm’s independent broker-dealer, “will continue as is,” though he “wouldn’t want to say it’s a non-event, since as you add horsepower and increase the revenue stream, you can finance additional products and services.” The 1,300-rep Raymond James and Associates locations will continue their current branding, while Morgan Keegan locations, said Zank, will be cobranded at first but will change to Raymond James signage over the next few months.

Zank further said that “we anticipate as we look at our map, that we might make some tweaks to the regional structure of the firm,” but he said “there’s not as much overlap as you might think geographically” despite the two firms’ shared southeastern U.S. focus.

Zank calls the status of the Morgan Keegan reps “free agency—we have to earn their business every day.” In addition, he said Raymond James “very much understands that the primary point of contact with the end client is the advisor, not so much the firm; if you recognize and accept that, it changes the way you run your business.”

The original purchase price was estimated at $930 million, but Morgan Keegan’s book value was increased by $250 million, Zank said, after the parties agreed not to make a previously anticipated $250 million dividend payment to Regions prior to the acquisition. Following the closing, Raymond James will receive that cash dividend of $250 million instead. Financing for the acquisition, Zank confirmed, included one equity and two note offerings. In a statement, Raymond James said it funded the transaction with cash on hand and the proceeds of $350 million in 6.9% senior notes due 2042, $250 million in Raymond James CEO Paul Reilly5.625% senior notes due 2024 and a public offering of 11.075 million shares of common stock.

As for when Raymond James Financial would begin to see the financial benefits of this infusion of advisor talent, Zank deferred to what CEO Paul Reilly (left) “has said on numerous occasions: we’re not focused on the next quarter or the next six months, but on the long term. You can make kneejerk reactions to carve out expenses; we’re taking a deliberate approach to this combination; the worst thing you can do is upset the cultures in these firms—that’s not what we’re going do.”


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