Regions Financial Sells Morgan Keegan To Raymond James

Jan.12.12 | About: Regions Financial (RF)

Regions Financial (NYSE:RF) released the following on Wednesday:

Regions Financial Corp. announced today that it has entered into a stock purchase agreement to sell Morgan Keegan & Company, Inc. and related affiliates to Raymond James Financial Inc., (NYSE:RJF) for $930 million. As part of the transaction, Morgan Keegan will also pay Regions a dividend of $250 million before closing, pending regulatory approval, resulting in total proceeds of $1.18 billion to Regions, subject to adjustment as described below. The transaction is anticipated to close during the first quarter, subject to regulatory approvals and customary closing conditions. Morgan Asset Management and Regions Morgan Keegan Trust are not included in the sale and will remain part of Regions’ Wealth Management organization.

As a result of the process of selling Morgan Keegan, Regions expects to record an impairment charge in a range of $575 million to $745 million (primarily non-deductible) in the fourth quarter of 2011 related to the $745 million of goodwill included in its Investment Banking/Brokerage/Trust segment.

The transaction increases RF's capital ratios and the company believes it will lead to low cost deposits due to a working relationship with Raymond James. This is all well and fine, but as to the use of proceeds all we get is:

Total consideration of $1.180 billion creates significant additional liquidity at the holding company.

Here's a thought: you are being hammered due to your inability to repay TARP, use the proceeds to at least pay down some of your $3.5B TARP preferreds. I understand that the 5% dividend is cheap money, but it has cost shareholders dearly.

Disclosure: I am long RF.