$210 Million Settlement May Force Morgan Keegan Sale

Thursday, June 23, 2011 00:10
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$210 Million Settlement May Force Morgan Keegan Sale

Tags: M&A

Selling subprime mortgage-backed securities cost Morgan Keegan and its corporate parent $210 million to settle with former clients, and now the two firms seem eager to part ways.

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Morgan Keegan was charged two years ago with pushing the failing securities more aggressively as the credit markets started to falter, then making "arbitrary" balance sheet adjustments to cover the erosion in these products' value.

 

Tellingly, Grayson Hall, CEO of Regions Financial -- which bought the Memphis brokerage a decade ago -- welcomes the settlement as giving him "greater flexibility with respect to the Morgan Keegan franchise." 

 

Hall has hired Goldman Sachs to look into strategic alternatives, which is generally code for finding a buyer for a business that's up for sale.

 

John Carson, CEO of Morgan Keegan, sees this as an "exciting" opportunity to develop his 1,200-advisor-strong firm's independent brand under new ownership.

 

At the moment, no potential buyers are even being gossiped about. Inevitably, LPL will come up as an option, only to be discounted because the clearing platforms don't line up.

 

As with Securities America previously, recruiters are already circling to see if the firm's brokers will bolt for the doors now that they know they're for sale.

 

In a somewhat bizarre aside, one says getting out from the Regions Bank shadow could be great for Morgan Keegan, much like getting out of Citigroup paid off for Smith Barney.

 

While brokers often bristle at having to take ultimate orders from a bank, a lot of Smith Barney advisors haven't exactly been happy being married to Morgan Stanley, either. 

 

True, Morgan Keegan may find much a better match than Smith Barney did -- CEO John Carson's definitely excited -- but the comparison seems a little forced given the circumstances.

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