Regions Financial Corp. has entered into a long-awaited agreement to sell Morgan Keegan & Co. and related affiliates to Raymond James Financial Inc. for $930 million.
The Memphis, Tenn., brokerage unit also will pay Regions a $250 million dividend before the sale is completed. Regions also said Wednesday that Morgan Asset Management and Regions Morgan Keegan Trust are not included in the sale, which is expected to close during the first quarter.
Regions, which bought Morgan Keegan in 2001 for $789 million, will indemnify Raymond James for litigation related to pre-closing activities.
As a result of the sale, Regions expects to record an impairment charge of $575 million to $745 million for the fourth quarter of 2011 related to $745 million of goodwill included in its investment banking segment. Regions said it has assumed that the goodwill impairment charge will be about $693 million in the fourth quarter. The remaining goodwill will be included in the gain or loss on the sale after the deal closes.
Regions also said that it expects to record a loss ranging from $432 million to $633 million during the fourth quarter. The company's earnings will be released on Jan. 24.
Regions, for the most, gave Morgan Keegan autonomy over the past decade. But analysts had questioned Regions' long-term commitment to the unit after the management team of AmSouth Bancorp, which Regions bought in late 2006, starting running the Birmingham, Ala., banking company. Speculation that Regions and Morgan Keegan could part ways intensified after the unit become increasingly mired in legal issues stemming from its management of funds hit hard by the subprime meltdown.
Morgan Keegan also suffered from turnover in key positions in recent years. Allen Morgan, who founded the company that bears his name, retired as the unit's chairman and as a Regions vice chairman in December 2007. Douglas Edwards abruptly retired as Morgan Keegan's CEO in April 2008. (At one point, analysts speculated that the former executives could vie to take over the struggling unit, with help from outside investors.)