Regions, Union Planters merging, will become 12th largest bank

As of Dec. 31, Union Planters' holding company, Union Planters Corp., had $31.9 billion in total assets; Regions' holding company, Regions Financial Corp., had $48.6 billion in total assets and $4.5 billion in shareholder equity, said Kristi Lamont Ellis, director of media relations for Regions.

The merger, which would create the 12th largest bank holding company in the United States, is subject to shareholder approval. Both groups of shareholders are expected to meet in June to decide the issue, Ellis said. If the merger is approved, the name change will be effective June 2005.

In addition to the shareholder approval, a completed merger requires approval from the FDIC, the Federal Reserve Board, the Securities and Exchange Commission, and various state agencies, said Jenifer Goforth, director of investor relations for Regions.

Both banks had talked of uniting for about five years, Ellis said, but discussions began in earnest between the two CEOs in fall 2003.

The banks

Founded in 1869, Union Planters Bank has its headquarters in Memphis, Tenn., and handles consumer and commercial banking, trust services, investments and insurance products. The company operates 717 offices with about 12,000 employees in 12 states. It also operates 925 ATMs, according to a joint Regions-Union Planters news release.

Birmingham-based Regions Financial Corp. provides consumer and commercial banking, securities, brokerage, mortgage lending and insurance products. It operates in nine southern states and employs about 15,000 throughout its 680 offices. It also has 744 ATMs, the news release said.

Carl E. Jones, 63, Regions' current president, chairman and CEO, will continue as CEO of the combined company until his planned June 2005 retirement, Nitsch said. After that, Jones will stay on as chairman. Jackson W. Moore, Union Planters' current CEO, will become president of Regions following the merger and then assume the CEO position upon Jones' retirement.

Doing the deal

Termed a merger of equals, the transaction is a 100 percent stock swap with no cash involved, Nitsch said. Neither group of shareholders will receive a premium for transaction.

Both publicly owned institutions trade on the New York Stock Exchange: Regions under the symbol RF and Union Planters under UPC.

Each share of Union Planters' common stock will be converted into one share of the new Regions stock and each share of Regions common stock will be converted into 1.2346 shares of the new Regions common stock, said Nitsch. "The new company will have approximately 450 million shares of stock outstanding," he added.

Nitsch said the merger will make Regions cash accretive, meaning the two companies together will earn more on a per share basis than they would individually. The heightened performance is "based on a 7 percent savings in cost over the next two years," he said, adding that the two companies would have earned 10 percent less individually than after the merger.

Cost of restructuring

According to Nitsch, the cost to restructure Regions and Union Planters Bank will cost $300 million. Of this sum $100 million is going toward personnel, relocations and any severance packages necessary; $30 million is for the re-do of branches and other facilities; and $170 million is for systems integration to combine technologies.

Inherent in this expense is an anticipated cost savings of $200 million to be fully realized by 2007, Goforth said. The $200 million of savings will be 15 percent phased in by 2004, 60 percent phased in by 2005, 85 percent phased in by 2006 and completely phased in by 2007, she added, "There's $200 million in cost savings out there as (Regions and Union Planters Bank) both exist today and as we both operate today that we believe, as a result of this merger, we can pull out of our cost structure. And that would be true on a go-forward basis," Goforth said.

Pending the merger, the combined revenue composition will be 55 percent from net interest income; 21 percent from banking and other services, including credit card fees; 12 percent from mortgage banking, including investment banking and brokerage and trust income; and 12 percent from full-service brokerage company Morgan Keegan, according to Regions' investor relation page.

Employees

Staff attrition will take care of most of the reduction in employee numbers from the merger, Nitsch said. "In Springfield there will be no anticipated reductions in staff, no cost savings, no divesture of branches," he added.

The Springfield area branches are a "unit bank, and we operate primarily as a sales force, not as an operational unit. It's the operational units that are being consolidated the mortgage companies, the servicing centers, those types of things," Nitsch said.

Morgan Keegan

Regions merged with investment and full-service brokerage company Morgan Keegan in March 2001, Ellis said. Morgan Keegan has 147 brokerage locations in 15 states and Canada. It offers services to private clients and retail broker-dealers, she said. Additionally, it offers fixed-income services, the underwriting of municipal bonds and has an equity capital markets line of business.

A partial stock-partial cash transaction was behind the Morgan Keegan buyout. In order to pay for the acquisition, Regions issued 20.4 million shares of common stock to Morgan Keegan shareholders based on an exchange ratio that gave each shareholder Regions' stock in exchange for Morgan Keegan stock, she said.

The cash outlay for the purchase was $203 million, Goforth said. Morgan Keegan operates in roughly 90 Regions branches and is a wholly owned subsidiary.

Part of the anticipated strength of the Regions-Union Planters merger is the belief that Morgan Keegan can make inroads into areas where Union Planters is located, but where it has little to no presence. Two target areas are Indianapolis and St. Louis, Goforth said.

Nitsch agreed and added that Morgan Keegan will add investment-banking strengths through its products and technology that will enhance the services Regions will provide to southwest Missouri.