Regions Financial Corp. (RF) resumed talks to sell its Morgan Keegan unit to Stifel Financial Corp. (SF) after private-equity firms lowered their bids for the brokerage, said two people with knowledge of the matter.
Regions began negotiations again with St. Louis-based Stifel in recent days, the people said, speaking on the condition of anonymity because the discussions are private.
Regions returned to Stifel after the most recent offers from private-equity firms came in below its expectations, with the highest bid at about $750 million, people familiar with the matter said last week. Stifel had indicated in the past months it could pay more than $1 billion for Morgan Keegan, before Regions cut off talks on concern that Stifel would have difficulty completing a transaction, people said.
Thomas H. Lee Partners LP and Aquiline Capital Partners LLC subsequently cut their joint bid for Morgan Keegan by more than $200 million, as did a group made up of Carlyle Group LP and Blackstone Group LP (BX), the people said last week. The offers were lowered after financing markets deteriorated and MF Global Holdings Ltd. (MF) filed for bankruptcy, the people said.
Regions is pushing for a sale of Memphis, Tennessee-based Morgan Keegan to boost capital and eventually repay a $3.5 billion U.S. bailout, the largest sum still outstanding for any institution under the Treasury’s bank-rescue program.
A combination of Morgan Keegan and St. Louis-based Stifel would unite two of the biggest U.S. regional brokerages. Morgan Keegan had about 1,200 financial advisers as of Dec. 31, according to a regulatory filing, while Stifel had 1,798 as of June 30.
One of the reasons Regions executives were concerned Stifel couldn’t complete a deal was the risk that Morgan Keegan executives and brokers, many of whom opposed a sale to a competitor, might quit before a sale was completed and jeopardize the transaction, they said.
Evelyn Mitchell, a spokeswoman for Regions, declined to comment. A spokeswoman for Stifel didn’t immediately return a call seeking comment.
Stifel dropped 4.8 percent to $30.54 at 3:41 p.m. in New York trading. The stock is down 22 percent this year through yesterday. Regions declined 7.3 percent to $4.06. The Birmingham, Alabama-based company had plunged 37 percent this year before today.
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