The agreement continues Morgan Keegan's recent pursuit of public finance businesses in the Southeast. With the purchase of Peeler, the firm will have bought six regional investment banks in the past four years that placed a strong emphasis on municipal bonds.

Terms of the deal, which is expected to close Oct. 3, were not disclosed.

According to Morgan Keegan chairman Allen Morgan Jr., the municipal finance arm of Peeler will become his firm's J. Lee Peeler & Co. division. He said that Peeler's chief executive officer, Jonathan Peeler, will be a president of the division, as well as a Morgan Keegan senior vice president.

Peeler's sales force, meanwhile, will make up Morgan Keegan's 32d branch sales office, Morgan said. He said the unit will be managed by Milton Barber, hired from Brown Asset Management, a subsidiary of Baltimore-based Alex Brown & Sons Inc.

The new Morgan units in Durham will continue to be located at Peeler's location adjacent to Research Triangle Park.

"We see North Carolina as very important for our strategy of long-term growth in both the fixed-income and equities markets," Morgan said in an interview yesterday.

The executive said that the Peeler firm's "reputation, along with the extensive contacts of Peeler and Milton Barber in both North and South Carolina, will contribute significantly to our efforts to develop a stronghold in this market," he said.

Morgan noted that last year his firm opened its first office in North Carolina, located in Wilmington. He said the firm would begin "aggressively recruiting" additional people for its branches in the state.

"This alliance creates a wider distribution network and allows access to a significantly larger capital base, which is advantageous to both our banking clients and our brokers," Peeler said.

The Peeler firm, founded in Durham in 1946 by the late James Lee Peeler, has been headed by Jonathan Peeler since 1963. Originally established as a municipal bond house, it has evolved into a general-service investment bank, with a membership on the Midwest Stock Exchange.

In recent years, J. Lee Peeler has maintained a strong presence as a financial adviser in North Carolina, with clients including the University of North Carolina System.

Morgan Keegan's plans to acquire Peeler follow its purchase of five investment banks in the Southeast since 1990. In May 1990 the firm bought George M. Wood & Co. of Montgomery, Ala., founded in 1937. In December of that year, Morgan bought Scharff & Jones, a New Orleans-based bond firm founded in 1932.

In March 1992, the firm purchased Cumberland Securities, established in 1931 and based in Knoxville, Tenn. Last year, Morgan bought Capitol Securities Group, based in Austin, Tex.. and established in 1979.

Last month, Morgan Keegan completed the acquisition of Louisville, Ky.-based Commonwealth Investment Group Inc., founded in 1988, and the firm's brokerage subsidiary Commonwealth Institutional Securities.

So far this year, Morgan Keegan ranks 27th nationally as bookrunning manager on 102 deals totaling $ 545.3 million, according to Securities Data Co. In 1993, it ranked 40th on the basis of 184 financings totaling $ 899.6 million.

When full credit is given to each manager, Morgan Keegan ranks 68th to date this year, with 170 issues totaling $ 1.63 billion. On this basis, the firm ranked 58th in 1993, with 323 underwritings totaling $ 5.37 billion.

J. Lee Peeler & Co. ranks 399th so far this year as lead manager, with two issues totaling, less than $ 1 million. In 1993, the firm ran the books on one deal, $ 15.4 million in size, placing it 260th among underwriters.

In 1994, Peeler ranked 223rd with full credit to each manager, on 12 deals totaling $ 183.9 million; Last year, Peeler was 93d as a co-manager, with 23 deals totaling $ 2.98 billion. As a financial adviser in North Carolina, Peeler has ranked fourth this year with eight issues totaling $ 76.6 million. Last year, it ranked eighth, on the strength of 12 deals totaling $ 118.7 million.

Morgan Keegan, founded in 1969, employs more than 1,200 people in 12 states.

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