Buyout firms circling Regions Financial Corp.’s Morgan Keegan brokerage unit lowered bids by at least $200 million after financing markets deteriorated and MF Global Holdings Ltd. filed for bankruptcy, according to people with direct knowledge of the process.
Thomas H. Lee Partners LP and Jeffrey Greenberg’s Aquiline Capital Partners LLC submitted the highest offer at about $750 million, the people said, asking not to be named because the talks are private. The group topped a joint bid from Carlyle Group LP and Blackstone Group LP, according to the people, who said previous offers valued the unit at more than $1 billion.
A deal hasn’t been reached and talks could fall apart as Regions is pushing both groups to raise their price, the people said. Regions, based in Birmingham, Alabama, has been planning to use proceeds from the sale to boost capital and pay back a $3.5 billion U.S. bailout. Regions has indicated it plans to collect a $250 million dividend from Morgan Keegan prior to any sale, increasing proceeds from the business, the people said.
Evelyn Mitchell, a spokeswoman for Regions, declined to comment on Morgan Keegan. Shares of the company rose 5 cents, or 1.3 percent, to $3.93 in New York trading at 1:39 p.m. They’ve lost 44 percent this year.
Regions is among the biggest U.S. banks that have yet to repay the Treasury Department rescue. The company said in June it was exploring options for Morgan Keegan, which provides brokerage and investment-banking services. Founded with five workers in 1969, the unit has more than 300 offices and 4,400 employees across the Southeast and Midwest, including Texas, Missouri, Ohio, the Carolinas and Florida.
Morgan Keegan agreed to be sold to Regions in 2000 for about $789 million. The unit, based in Memphis, Tennessee, had a $26 million third-quarter profit, Regions said on Oct. 25. That was up from $22 million a year earlier and a decrease from $60 million in the second quarter.
Regions Chief Executive Officer Grayson Hall, 54, told investors in September that the Troubled Asset Relief Program repayment would depend on achieving “sustainable profitability” and an improvement in credit metrics, not just a successful resolution of the review of Morgan Keegan. Regions, the 10th-largest U.S. bank by deposits, has said it hired Goldman Sachs Group Inc. to help examine options for the unit and find ways to manage capital and increase shareholder value.
Stifel Financial Corp., a brokerage based in St. Louis, also bid for Morgan Keegan and was rejected, people with knowledge of the matter said last month. Among the reasons was a concern that Morgan Keegan executives and brokers, some of whom opposed selling to a competitor, might quit before the purchase was completed and jeopardize the deal, they said.