Regions Financial Corp. may have been the buyer in its deal with AmSouth Bancorp. this month, but several analysts say it appears that AmSouth's management team is emerging as the dominant one in the deal's aftermath.
Regions bought AmSouth on Nov. 4 for $10.5 billion, creating a banking company with $142 billion of assets and 2,000 branches. Though Regions was the acquirer and has kept its name, several developments leading up to and coming after the deal's closing have prompted some analysts to label the transaction "a reverse merger" - one in which AmSouth's team essentially takes over direction of the company.
When the deal was announced in May, the purchase price valued AmSouth at a discount to its closing stock price a day earlier. But AmSouth president, chairman, and chief executive C. Dowd Ritter was tapped to handle day-to-day operations as the post-merger Regions' president and CEO. (Former Regions president and chief executive Jackson W. Moore remains chairman.)
Several high-level Regions executives have left the company, and the new Regions will use AmSouth's core banking systems and its strategy of aggressively building branches in states such as Florida. It will also adopt AmSouth's management structure, which has separate managers for business lines and geographic regions.
A Regions spokesman said that company executives were unavailable to comment this week but reiterated a comment this month by D. Bryan Jordan, the company's chief financial officer, who said that 600 management roles are "very balanced between the two organizations." Mr. Jordan is one of a select group of former Regions executives in significant management roles.
"This is not Regions anymore," Kevin Reynolds, an analyst at Stanford Equity Group, said in an interview Monday.
Mr. Reynolds said the company's metamorphosis could temper its growth prospects since AmSouth's management team may look to expand Regions' balance sheet to the detriment of net interest margins and earnings growth. "This has become a larger version of AmSouth," he said. "Is this going to be a growth institution? Absolutely not."
In the third quarter, Regions had a 4.21% margin and AmSouth 3.19%. Regions also had better year-over-year earnings growth (37% compared with 4.1%), though AmSouth's loan book grew faster (11.5% compared with 2%).
Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, said the most worrisome development involves the timing and degree of executive departures from the acquiring institution. "Why would Regions decide to buy another company and then let it run the bulk of the franchise?" he asked. "It raises an eyebrow."
A June memorandum showed that many AmSouth executives would have key roles at Regions. The risk-management group is made up entirely of former AmSouth executives, with William C. Wells 2nd as chief risk officer and Michael Willoughby as chief credit officer. John Buchanan, who was AmSouth's general counsel, is the chief reputation-risk officer.
Several high-level Regions executives opted to retire in recent weeks.
Richard D. Horsley, who was a vice chairman and the CEO of Regions' business enterprise group, retired when the deal closed. He had handled the integration and transition team. Two other Regions directors retired when the deal closed as the companies combined their boards (the former Regions still has 12 directors; AmSouth brought all nine of its directors to the new board).
Last week Regions said in a regulatory filing that Samuel E. Upchurch Jr., the head of its general bank, would retire Jan. 31. Mr. Upchurch is to be succeeded by O.B. Grayson Hall Jr., a former AmSouth executive who heads Regions' business lines. The most senior business line managers - Candice Bagby for consumer banking and Charles Mayer for commercial banking - are also AmSouth veterans.
Few high-level posts remain in the hands of Regions' executives. They include Mr. Jordan, the chief financial officer, and G. Douglas Edwards, the CEO of the investment banking unit, Morgan Keegan & Co. Inc., which was a unit of the old Regions.
Mr. Fitzsimmons said analysts would be watching Mr. Jordan and that it would "be interesting" should he decide to leave the company. (Former AmSouth CFO Alton E. Yother remains at Regions as the controller and principle accounting officer.)
Mr. Ritter described a more collaborative company during a Nov. 2 interview. "Early on as we were starting to get this team together, we realized that there are some really good bankers from both companies. It is unusual, but we're going to end up with the best bankers from Regions and AmSouth."
"This is clearly a reverse merger where the AmSouth people have taken over control of the combined company," said Richard Bove, an analyst at Punk, Ziegel & Co.
Regions had already set the stage for such a transition when it bought the former Union Planters Corp. of Memphis in July 2004 and allowed Mr. Moore, the Tennessee company's chairman, president, and CEO, to run the combined company.
Though analysts were willing to give Mr. Ritter his chance at the helm of Regions, several noted that he has had his share of setbacks while running AmSouth.
It struggled to integrate its acquisition of the former First American Corp. of Nashville in 2000. And in October 2004 it paid a $50 million fine and agreed to a cease-and-desist order after regulators accused it of "systemic and serious" violations of the Bank Secrecy Act and other anti-laundering laws. Regulators lifted the order this April.
