Republished from: “Memphis Commercial Appeal”
January 13, 2012 | Ted Evanoff
The head of the Florida company buying Morgan Keegan & Co. said he is in no hurry to cut costs or lay off workers in Memphis.
“We’re staying in Memphis. We’re committed to it. We’re not looking to get all the costs out and consolidate in St. Petersburg,” said Paul Reilly, CEO of Raymond James Financial Corp. “Our goal is to make measured changes.”
Study teams formed by Raymond James will take a year or more looking at how the two investment firms can mesh together, Reilly said Thursday.
“The people count will be very stable for a year or longer,” Reilly said in a telephone interview, adding that, “I can’t tell you there won’t be any layoffs.”
Morgan Keegan, long regarded as a Memphis business and civic leader, employs 1,050 people in the city and about 2,000 others nationwide.
Birmingham-based Regions Financial Corp. disclosed Wednesday that it agreed to sell the Memphis firm to Raymond James for $930million.
The deal, sought by the bank to raise money for its own operations, is expected to close by April.
Reilly plans to visit the Morgan Keegan head office at 50 N. Front for the first time next week.
“We’re going to focus on doing it right,” Reilly said about the merger. “A lot of firms try to jam through cuts for the cost savings. We’re not doing that.”
Reilly said integration teams formed of Morgan Keegan and Raymond James employees will explore how to bring the businesses together. Dennis Zank, Raymond James’ chief operating officer, will coordinate the teams.
Reilly noted that the St. Petersburg head office, which employs about 3,100 workers, has the capacity to take on some of the administrative duties performed in Memphis. But it’s not clear how many of those jobs in Memphis may be lost.
Other work by Morgan Keegan related to supporting the sales force, Reilly said, will continue in Memphis.
“If you look back five years from now, we could well be bigger than we are now,” Reilly said.
Reilly said he expects:
Workers will stay in the Downtown tower rather than relocate to other buildings.
Morgan Keegan’s name will continue to appear on the public finance and fixed-income departments, perhaps as a division of Raymond James.
Support will continue for the professional tennis tournament in Memphis, now called the Regions Morgan Keegan Championships.
Information technology crews in Memphis could expand their role to back up Raymond James’ entire U.S. service area.
John Carson, Morgan Keegan’s CEO, will stay in Memphis as president of Raymond James and head of the merged public finance and fixed-income units.
Bonuses will total $215million, including about $75 million in restricted stock, for the members of the Morgan Keegan sales force who agree to stay with Raymond James.
“There will be (job) losses in Memphis,” Reilly said. “But we’re pragmatic. We’re looking at long-term earnings, stability and growth. The only way you can do that is with people. “
Wall Street generally applauded the acquisition. The Street, an online newsletter, reported that bank analyst Steve Stemach of FBR Capital called the deal an “inside-the-park home run” by the Florida company.
With the $930 million paid to Regions, the deal will cost Raymond James $1.12 billion, including $140 million in cash retention bonuses set aside for the 1,200 financial advisors employed by Morgan Keegan and another $50 million for professional fees, severance and contract terminations.
Raymond James intends to continue employing the Morgan Keegan executives and managers who show merit, but let go of others.
Besides the payment from Raymond James, Regions will receive a $250million dividend from Morgan Keegan. Regions also will pay for any more litigation resulting from Morgan Keegan’s failed mutual funds.
The bank, hit by poor real estate loans made in the 2000s, is trying to raise cash by selling the profitable Memphis firm.
Even with the money from the sale, Regions might have to raise more capital to pay off its $3.5 billion federal bailout loan, reported bond analyst Kathleen Shanley of the research firm Gimme Credit.
– Ted Evanoff: (901) 529-2292