Morgan Keegan, the brokerage unit of Regions Financial Corp., is drawing interest from several private equity firms and rivals, people familiar with the situation told sister news service Reuters.
TPG, Blackstone and Apollo declined to comment. Regions and the rest of the potential bidders were not immediately available for comment.
Regions hired Goldman Sachs Group Inc. in June to explore strategic options for that unit after agreeing to pay $210 million to settle allegations that its Morgan Keegan brokerage fraudulently marketed mutual funds. Seven federal and state regulators including the U.S. Securities and Exchange Commission had accused Morgan Keegan of fraudulently misleading investors from January to July of 2007 about the risks of mutual funds filled with subprime mortgages, and artificially inflating the funds’ prices.
Regions has owned Memphis, Tenn.-based Morgan Keegan since 2001. Regions has not posted an annual profit since 2007 and unlike most other large U.S. banks has yet to receive regulatory approval to repay the $3.5 billion it took from the Treasury Department’s Troubled Asset Relief Program.
Regions could expect $900 million to $1.3 billion from a sale of Morgan Keegan, although the amount would depend on what is sold, said Jefferson Harralson, bank analyst at Keefe Bruyette and Woods Inc. He called the unit one of Regions’ “crown jewels.” Morgan Keegan has about 1,200 brokers in its private client group and also has investment banking and capital markets businesses.
The bank said Morgan Keegan generated $1.32 billion of gross revenue in 2010. It also said Morgan Asset Management and Regions Morgan Keegan Trust are not part of its review. “Regions needs a great deal of capital and selling Morgan Keegan would be a great way to get part of the way there,” said Richard Bove, a banking analyst at Rochdale Securities LLC.
(Paritosh Bansal is editor in charge of Reuters’ mergers and acquisitions desk in New York; additional reporting Megan Davies and Joe Rauch.)