Morgan Keegan & Co. Inc. advisers appear comfortable with the idea of becoming part of Raymond James Financial Inc.
As of yesterday, 98% of those who received retention offers from Raymond James in late January had indicated they would join the firm, according to a company statement issued this morning. Raymond James acquired Morgan Keegan from Regions Financial Corp. for $930 million Jan. 11.
“We've said all along what a tremendous fit these two firms are, both culturally and geographically. I don't know of any other merger in the industry that can boast this kind of success,” said Dennis Zank, chief operating officer for Raymond James and the point person on the integration of the two firms. “The cohesiveness of the Morgan Keegan sales force is remarkable, given the turmoil they've experienced.”
It took Regions more than six months to find a buyer for Morgan Keegan as volatile market conditions scared off private-equity buyers and likely lowered bids from other potential buyers such as Stifel Nicolaus & Company Inc. Very few of the more than 1,000 Morgan Keegan advisers left the firm during that period.
The retention offers to Morgan Keegan advisers ranged from 30% of trailing-12- month production for those producing more than $300,000, to 70% for advisers generating more than $1 million in revenue. “We went down to the $300,000 threshold with our retention offers because we value those advisers,” Mr. Zank said.
The capital markets businesses of Morgan Keegan would be integrated into Raymond James this year while the final conversion of advisory client accounts to the Raymond James platform likely would happen by early next year, he said.
The company raised just under $360 million in equity capital and another $350 million in debt with a 30-year note last month to help fund the acquisition. This morning, it announced pricing on a $250 million 12-year note yielding 5.625%.
Further signs of a smooth integration of Morgan Keegan should help win over credit rating analysts. Standard & Poor's Rating Services put the company on Creditwatch with negative implications when the deal was announced in January, but raised the rating three weeks ago.
“We got indications that the integration of Morgan Keegan was going according to plan,” said S&P credit analyst Nic Khakee, who had not seen this morning's release. “This sounds consistent with what management described to us.”
Raymond James said the merger remains on schedule to close April 2.
